Thursday, January 30, 2014

Obama's MyRA Nest Egg? That's It?

Nick Summers of Bloomberg Businessweek reports, Can Obama's 'MyRA' Lure Workers Who Don't Save for Retirement?:
President Obama picked a good venue to boost the “MyRA” retirement savings accounts he touted in last night’s State of the Union address. He spoke at a U.S. Steel plant in Pennsylvania, a state where the public pension system has a $47 billion shortfall and where workers would be right to worry about running out of money as they age.

Defined-benefit plans are disappearing—they covered 35 percent of Americans in the early 1990s and only 18 percent in 2011—and defined-contribution plans such as IRAs and 401(k)s haven’t made up the difference. Too few American workers have such accounts, and most of the ones who do don’t save enough. A survey last year by the Employee Benefits Research Institute found that only 13 percent of respondents are “very confident” they will be able to live comfortably in retirement.

That dismal picture helps explain the intense interest in MyRA since Obama introduced the idea last night. “It’s a new savings bond that encourages folks to build a nest egg,” Obama said. “MyRA guarantees a decent return with no risk of losing what you put in.” Administration officials fleshed out a few of the details for reporters: The accounts are intended for workers whose employers don’t offer 401(k) accounts, and they can be started with as little as $25; contributions after that can be as low as $5, withdrawn automatically from their paychecks; and earnings on the investments—U.S. government bonds—would be tax-free, like a Roth IRA.

MyRA plans would be subject to a $15,000 maximum balance, after which they will be converted without penalty into IRAs. Those amounts are small, but the idea is to get workers who currently save nothing into the system.

In West Mifflin, Pa., Obama talked up the new plan to steelworkers. “We’re calling it MyRA,” he said. “Not IRA; MyRA.” Expected to elaborate on the concept, he didn’t offer much in the way of new details, with one exception: The president said savers would be able to withdraw their contributions “in an emergency” without paying a penalty.

After speaking, Obama signed a presidential memorandum making the MyRA official and handed it to a bundled-up Treasury Secretary Jack Lew.
Dan Kadlec of TIME also reports, The Problem With President Obama’s ‘MyRA’ Savings Accounts:
To better enable Americans to save for retirement, President Obama said he would order a new “starter” savings plan called MyRA geared at low-income households. It’s a fine idea. But as with any personal savings account, you must be able to fund it for it to matter. That may be the biggest problem with the program.

Little is known about these new accounts. They would function like a Roth IRA, allowing savers to put in after-tax money that would then grow tax-free. They’d be available through your employer to anyone who does not have an individual retirement account or work for a company that offers a traditional pension or 401(k) plan. That comes to about 39 million households.

The big advantage is that you could open a MyRA with as little as $25 and make contributions of as little as $5, creating a regular savings opportunity that most low-income households have never had. Typically, plan administrators require $1,000 or more to open an account. MyRAs would also benefit from a no-fee structure that does not eat away at savings.

Your MyRA would also enjoy a government guarantee against loss of principal. The downside is that your money would be funneled into low-yielding Treasury securities and have little potential to grow enough to make a big dent in your personal retirement savings crisis—or that of the nation as a whole—until you have accumulated enough to roll it into a regular IRA where you might benefit from investments with greater growth potential.

Offering low-income households a place to save doesn’t really fix the big problem: they still must have the money and the discipline to take advantage. More than half of workers have less than $25,000 in savings and 28% has less than $1,000 in savings, reports the Employee Benefits Research Institute. And with the MyRA, you could take money out anytime without penalty. That would be awfully tempting the first time money gets tight.

The retirement savings plan represents an important first step,” says Ai-Jen Poo, director of the National Domestic Worker’s Alliance. Still, she says, “Most Americans are not able to plan for their futures because they are trying to deal with their most immediate needs, like paying their rent and keeping their lights on.”

The new accounts call to mind the so-called “catch-up” provision enabling savers past age 50 to put away an extra $5,500 in their 401(k) each year. That’s a fine idea too, but since its adoption in 2001 only the relatively well to do have used it. Let’s face it: Not many folks have an extra $5,500 lying around.

Only 13% of those eligible have made the extra contributions, according to an analysis of data provided by Fidelity Investments. That’s largely because regardless of age almost no one even contributes the maximum $17,500—already a lot of money to take out of your budget each year. For the vast majority, the extra $5,500 has proven to be irrelevant, concludes the Center for Retirement Research at Boston College.

So let’s not pretend that MyRAs will save our collective retirement dreams. They give more people more opportunity to save, and you cannot argue with that. But for these accounts to make a real difference, the folks they are meant to help most will need extraordinary willpower.
On Tuesday, millions of us watched President Obama deliver the State of the Union address. I must confess, even though I'm Canadian, I love U.S. politics, especially the State of the Union. It's the only time you get to see Republicans, Democrats, Chief Justices and top military brass all in one room listening to their commander in chief. Sure, there is a lot of showmanship but from the time of President Reagan, I never miss the State of the Union.

The theme of the State of the Union was centered around the rise of  inequality. America has a huge inequality problem and it's not alone. According to an Oxfam report, the world's richest 85 people on the globe control as much wealth as the poorest half of the global population put together. In the U.S., six Walmart heirs collectively own more wealth than 42% of Americans combined. No wonder some are now warning the Davos billionaires are oblivious to the coming revolution.

But as I've previously discussed, capitalists and pension funds thrive on inequality. The very essence of capitalism is built on pillars of inequality. If you don't understand this, you don't understand the bigger picture and why the power elite will do whatever it takes to fight the specter of deflation using any means necessary.

(Make sure you read the latest from Bichler and Nitzan to understand the way the world really works. Also read David Brooks' NYT article, The Inequality Problem, but according to Jonatha Nitzan, "Brooks gives the standard neoclassical explanation: the poor are poor because they have low productivity. Make them more productive, and they will be richer, perhaps as rich as Bill Gates and Warren Buffet, and off goes the inequality. As for my opinion, this is nonsense. The issue is not productivity (which nobody, not even Brooks, has ever measured). It is power.")

Now, back to Obama's State of the Union address and his new "MyRA" plan to bolster America's retirement system. While some think the State of the Union's most despicable moment was the emotionally charged ending where President Obama saluted and praised the courage of Army ranger Cory Remsburg, I was more appalled by the glib and cryptic comments on the new retirement plan he proposed. I was actually in a state of shock, thinking to myself is this the best the "greatest nation on earth" can do to bolster its decrepit retirement system?

Folks, let me be blunt, MyRA will do absolutely nothing to bolster America's retirement system which is a miserable failure. The majority of Americans are falling through the cracks, unable to save for retirement, and for those that do manage to save something, they are living a 401(k) nightmare, anxious about retirement, or falling prey to sharks peddling loan advances to pensioners. It's the biggest scandal in modern times and yet no politician, including the president of the United States, is doing one damn thing about it.

Let me be crystal clear. The United States of America has a jobs crisis, a health crisis, an education crisis and a pension crisis. For all the red, white and blue flag waving jingoism, it's high time U.S. politicians admit this and move to implement Canadian style reforms to their education, health and pension systems (Obamacare is a joke, I know, my cousin and friends are doctors practicing in the U.S.).

More specifically, what does the U.S. need to really bolster its sprawling retirement system? It needs to adopt a universal pension plan for all Americans and have the assets managed by well-governed large public pension funds that operate at arms length from the government. This is the only surefire way to cure pension envy and make a real long-term difference to the country's retirement system.

Of course, any discussion of privatizing Social Security and moving toward a model that the Canada Pension Plan Investment Board has adopted will be met by opposition from the Left and the Right. But as I stated in my last comment on Ontario's new Technical Advisory Group, good pension policy makes for good economic policy but you must get the governance right or else don't bother implementing any reforms. Without proper governance, America's public pension problem will only get worse.

As always, I welcome comments from my readers but you're not going to change my mind on what needs to be done. I think of pensions the same way I think of universal healthcare and education. The government has a responsibility to provide for all its citizens but it must ensure these programs are run properly, effective and costs are controlled.

One of my friends sent me these comments yesterday following my latest comment:
I do not trust government to keep their hands out of the cookie jar. When healthcare costs start to rise, they will start looking for money. It is at that point when government pensions with liquid assets will be difficult to resist.

Btw, I would prefer if government would start thinking about how to fund their healthcare obligations going forward. The reality is that the baby boomers have contributed only a fraction of what will be needed to service their healthcare needs in retirement. Asking Gen X and Y to pay for both their retirement and healthcare benefits is asking too much.
I agree with his comments on healthcare costs spiraling out of control but completely disagree with his comments on the government tapping into our large public pension funds to fund these costs. I need to write a comment on governance because while the Canadian Coalition for Good Governance is good at advocating high governance standards for public companies, it hasn't done anything in terms of advancing best governance practices for public and private pension plans (and it really should).

Below, watch President Barack Obama's 2014 State of the Union address. I also embedded a CNBC discussion on why Obama's "MyRA" plans will have limited advantages. That is a gross understatement. America, brace yourself for a retirement crisis and more pension poverty. That's change you can believe in!

Wednesday, January 29, 2014

Ontario's Technical Advisory Group?

Keith Leslie of the Canadian Press  reports, Wynne says new plans for Ontario Pension Plan to be unveiled this spring:
Plans for an Ontario Pension Plan will be unveiled by the minority Liberal government this spring, ahead of a widely expected provincial election, Premier Kathleen Wynne announced Tuesday.

"We believe that we need to set up a structure so that people can save their own money, and they can make investments along with their employers in their future," said Wynne.

The minority Liberal government is worried people are not saving enough for retirement, and is prepared to take action on its own since the federal Conservatives refuse to enhance the Canada Pension Plan, she added.

"This is not something the government dreamed up as an issue," said Wynne. "This is something that comes from people. It really is about people having the opportunity to save for their retirement, and giving them a context within which to do that."

The federal Conservatives say increasing pension contributions amounts to a job-killing payroll tax, an argument Wynne flatly rejected.

"This is not a tax," she said. "This is an investment in the future that individuals and businesses would be making, and it is a responsible way forward."

Bill Morneau, a human resources consultant and a pension adviser to Wynne, said workers need to view contributions as an investment in their future.

"The idea is it's not a tax, it's exactly the opposite," said Morneau.

"It's helping people to do something that they know they need to do, and that's to save more for their retirement."

Ottawa wants the provinces to support Registered Pooled Pension Plans as an alternative to enhancing the CPP, but Ontario rejected that option because they are voluntary, not mandatory.

Many Canadians do not contribute the full amount to their Retirement Savings Plans each year because they are not forced to do so, said Morneau.

"Currently there's a huge amount of leftover room in RSPs, so by having some sort of mandatory savings approach it is going to help people ensure they have enough for the future," he said.

"After you have that mandatory approach, is there a way that people who already have saved enough can opt out, and that's a question we need to address."

Wynne appointed a special panel, headed by former prime minister Paul Martin, to advise the province on how to create a pension plan and whether it would allow people to opt out.

"There needs to be a mandatory aspect to this in order to have the number of people involved that makes it a viable plan, but some of the plans that exist in other jurisdictions have an opt out clause," she said.

"What we know is that where plans like this have been set up and there is an opt out clause, a very small percentage of people actually do opt out."

Ontario's New Democrats said not one Liberal voted for an Ontario Retirement Plan when the NDP proposed it in 2010, and accused the government of being good at naming panels, which they called a stalling tactic.

"Unfortunately, for ten years the Liberals have talked a lot about pension reform, but Ontarians haven't seen any results," said NDP house leader Gilles Bisson.
And true to form, Kelly McParland of the National Post also chimed in reporting, Kathleen Wynne gears up to save Ontarians, whether they need it or not, stating the following:
The Wynne view that people have to be saved from themselves fits with the leftward shift she’s instituted since becoming premier a year ago. She’s indicated she feels Ontarians are willing to accept higher taxes in return for better public transit and plans to campaign on a promise to do just that. As with her pension scheme, the transit tax would apply across the province even though the need is centred mainly in the greater Toronto region. Other municipalities would have to collect the money but could find other projects to spend it on.

She also intends to hike the minimum wage, and to date the increase retroactively to the rate of inflation since 2010. Employers would face an extra 75¢ an hour to the current rate of $10.25, and regular increases as other costs go up. No ceiling would be set despite calls for a $14 minimum. Under a re-elected Wynne government, then, employers would face higher costs for wages and pension payments, while employees would pay more for pensions and extra taxes for transit. And the election hasn’t even been called yet.

Wynne says the new pension increase isn’t a tax, but “an investment in retirement.” It’s a testament of how attitudes have changed — within governments, in any case — in a little over a generation. The CPP was introduced in 1966 by former prime minister Lester Pearson as a complement to the existing Old Age Security program. Only Canadians who joined the workforce after 1966 have spent their entire careers contributing. Prior to that, retirees somehow made due for the entire previous history of the world, via savings, family or extended working lives. But less than 50 years later, people are deemed incapable of choosing for themselves how to prepare for their old age. It could be that some Ontarians simply plan to keep working as long as they can, and don’t see the need for another pension plan. But Kathleen Wynne is going to protect them, whether they like it or not.

The next Ontario election, likely just a few months away, may prove to be a watershed. Ms. Wynne evidently believes voters’ anti-tax bias has dissipated and they are ready for a government willing to borrow, spend and tax, all at the same time. Where Mr. McGuinty belatedly felt the need to embrace a measure of restraint after years of big spending, Ms. Wynne has slowed his drive to balance the budget and says the provincial deficit will still be eliminated, some day. It’s just not clear when.

Maybe she’s right and the province is ready for a shift to the left. Since the disastrous NDP government of Bob Rae the presumption has been that premiers raised taxes at their own peril. As Ms. Wynne occupies ground to the left of centre, today’s NDP of Andrea Horwath may be pushed even further in that direction, leaving only the Progressive Conservatives to preach caution and prudence. It’s a clear choice. Whichever way it goes, it’s likely Ontario will feel the impact for some time.
I don't know if Kelly McParland actually believes the garbage he is writing but it's a sad testament of how pathetic and biased reporters have become when they willfully ignore the facts and shamelessly resort to scaremongering tactics.

Earlier this week, I lambasted The Waterloo Record for attacking Wynne's flawed pension plans and clearly stated the following:
The editorial above is pure garbage. It's just a bunch of scaremongering that foolishly claims the new supplemental pension plan(s) Ontario is proposing will "kill jobs." The reality is it will create jobs because as more and more people retire in dignity and security, they will spend more money in their golden years. And in any economy, it's consumption that primarily drives growth.

Canadians need to get informed on what is in the country's best interests when it comes to pension policy. They need to stop listening to those that promote myths on public pensions, warning of our two-tier retirement system, and understand that the only surefire way to cure pension envy is to introduce a universal pension plan where savings are managed by our well-governed public pension funds.  
I want all you bonehead reporters who regularly read my blog to get it through your heads, less than a third of the assets managed by our public pension funds come from contributions (employees and employers). The bulk of the assets come from investment gains, which is better than OAS and GIS as they need to match contributions one for one.

More importantly, enhancing the CPP isn't just good pension policy, it's good economic policy. The Canadian economy is going to go through some very rough seas ahead. I wrote about it last month when I explained why it's time to short Canada and bet on a fall in the loonie and energy stocks (those of you who made serious money taking my advice can show your appreciation by subscribing to my blog on the top right-hand side).

But even though the Canadian economy is going to go through a very rough patch ahead, I remain undeterred and a die hard proponent of enhancing the CPP because I understand macroeconomics better than these bonehead Conservative policymakers in Ottawa, shamelessly pandering to the financial services industry.

Our Canadian banks and insurance companies are so dumb, they just don't get it. Enhancing the CPP for all Canadians is in their best long-term interests but they're so shortsighted and ideologically warped, they just can't see it. As the demographic shift continues and more and more people retire, we need to ensure they do so in dignity and security.

Importantly, the benefits of defined-benefit pensions are grossly under-appreciated. As more people retire with a safe and secure retirement income, they will spend more, contribute to government revenues by paying sales taxes, boost economic growth through consumption and reduce reliance on the social welfare programs, reducing our long-term debt. It's simple folks, enhancing our defined-benefit pension plans makes good long-term economic sense and any economist who tells you otherwise is a complete and utter fool.

I know, there are a bunch of big swinging dicks that will scream at me: "I don't want to give my money to CPPIB, the Caisse, Ontario Teachers, AIMCo or any other public pension fund. I can do a better job managing my retirement than these big, bureaucratic funds." Maybe they can but they're part of the 1% and there is no guarantee that they won't fall into economic hardship or screw up big at some point during their investment horizon.

The reality is most Canadians aren't saving enough for their retirement and even when they do, they're getting raped on fees from mutual fund companies. And Premier Wynne is right, if we don't do something to bolster our retirement system, the economic crisis ahead will only be worse. I actually think it's too late and we've been dithering on this issue for far too long. Harper and Flaherty can pat each other on the back for their silly "Economic Action Plan" but they've done nothing significant to bolster our economy and the proof lies in the economic pudding ahead (it will get ugly).

Make sure you read my next comment where I will rip into President Obama's "MyRA". I promise I won't hold anything back as the "greatest nation on earth" is making another monumental mistake. I don't know who the hell advises the President on retirement security, but it looks like America's 401(k) nightmare will only get worse as this policy is destined to fail miserably.

Finally, Premier Kathleen Wynne announced yesterday that the Ontario government has assembled a new technical advisory group to advise the government on how to strengthen retirement income security for people across the province:
The Technical Advisory Group on Retirement Security is made up of six leading pensions experts from the public, private and non-profit sectors: Bill Morneau, Keith Ambachtsheer, David Denison, Susan Eng, Melissa Kennedy and Jim Keohane.

Alongside former Prime Minister Paul Martin, this group will advise the government on how to improve the retirement income system, including an Ontario-based alternative to a Canada Pension Plan (CPP) enhancement.

The government is moving forward with a made-in-Ontario solution to provide the province's hardworking people with the retirement security they deserve. This group will help the government develop a retirement plan that is viable, responsible and puts people first.

Helping people retire with dignity and security is part of the government's economic plan to invest in people, build modern infrastructure and support a dynamic and innovative business climate.
Quick Facts
  • The Right Honourable Paul Martin is working with the government as Special Advisor on Retirement Income Security.
  • Many Ontarians, including middle- and higher-income earners, may not be saving enough to ensure comparable standards of living in retirement.
  • Fewer than 35 per cent of workers in Ontario have a workplace-based pension plan. Coverage for workers in the private sector is even lower, with only 28 per cent having the benefit of plan membership.
Now that is one top-notch Technical Advisory Group but I'm disappointed I wasn't named to lead the battle on getting the governance right at this new pension plan (might have to leak out my 2007 report to the Treasury Board of Canada and beef it up). I'd love to see David Denison, the former President and CEO of CPPIB, jump into federal politics. He'd be a star candidate, even better than Jim Leech.

Below, watch the press conference where Ontario Premier Wynne and Minister of Finance, Charles Sousa, introduce the Technical Advisory Group (if it doesn't load right away, click here). Thank god I wasn't there, I would have ripped into that reporter asking all those dumb questions and blasted him publicly. What a moron, a testament to the sorry state of reporting in this country.

Watch live streaming video from premierofontario at

Tuesday, January 28, 2014

Air Canada's Pension Flying High?

The Canadian Press reports, Air Canada eliminates $3.7B pension deficit, posts small surplus:
Air Canada took a major step forward Wednesday as it reported its pension plans posted a small surplus, compared with a $3.7-billion deficit last year.

The improvement, to be confirmed later this year, helped boost shares in the airline to a nearly six-year high Wednesday.

Air Canada shares closed up 72 cents at $9.67 on the Toronto Stock Exchange.

The pension deficit have been a major drag on Canada's largest airline for many years, resulting in friction with Air Canada's unions as well as a significant expense. Air Canada's pension deficit peaked at $4.2 billion in 2012.

"We have, over the past four years, made significant progress," Air Canada president and chief executive Calin Rovinescu said.

The unions welcomed the turnaround, which they say will assuage fears of employees and retirees.

"Obviously we're pleased that the projected deficit has been eliminated because that has been a monkey on our back since 2003," said Leslie Dias, national representative of Unifor, which represents airport and call centre workers.

The head of the pilots' union said the surplus means that employee pensions are more secure and that about $1 billion worth of pension benefit cuts it agreed to, produced results.

"Many of our members and employees at Air Canada were cynical and skeptical about their pension benefits and I think today we've been shown that with sound management and sensible regulations that these pension plans can survive," Craig Blandford, president of the Air Canada Pilots Association, said in an interview.

The small surplus came as Air Canada (TSX:AC.B) saw a big drop in its pension plan liabilities as the interest rate used to calculate them increased sharply, reflecting an increase in long-term bond rates.

The rate for determining the plan's liabilities increased to 3.9 per cent compared with three per cent last year, reducing the deficit by an estimated $1.35 billion. Every tenth of a percentage point increase in the discount rate lowers the solvency deficit by $150 million.

The pension plan also reported a 13.8 per cent return on investments in 2013, benefit amendments that decreased the deficit by $970 million, and a $225-million contribution by the company.

Under a deal with Ottawa last year, Air Canada agreed to put $1.4 billion over seven years -- at least $150 million annually or $200 million on average -- into its pension plan to deal with its deficit. Without the agreement , the airline would have been forced to devote hundreds of millions more annually to its pension plans.

The airline said Wednesday that it may now consider opting out of its agreement with Ottawa, although not likely this year.

Such a move would free up as much as $200 million per year.

The unions, whose support was crucial in obtaining the deal with Ottawa, said employees would be irked if the airline rewarded shareholders instead of workers during the next round of bargaining in 2015.

"We think the company should err on the side of prudence and continue to make payments of at least $150 million annually to make sure that our members receive the decent retirement they are entitled to," stated Katherine Kontosthenos, vice-president of CUPE which represents flight attendants.

Air Canada is not alone in seeing an improvement in the status of its pension plans.

Consulting firm Mercer said earlier this year that rising interest rates and strong stock markets have helped defined pension plans across the country post some of their best results in years.

The Mercer pension health index, which tracks the funded status of a hypothetical defined benefit pension plan, stood at 106 per cent at Dec. 31 -- its highest level since June 2001.

Analyst Walter Spracklin of RBC Capital Markets, who raised his target price for Air Canada's shares to $13 from $10, said the elimination of the pension deficit was "a significant positive" for the airline.

In addition to the benefit of the pension improvement, David Tyerman of Canaccord Genuity said the airline's shares have substantial upside due to the introduction of more high-density seating on Boeing 777s, the launch of its Rouge low-cost carrier and pending arrival this spring of Boeing 787 Dreamliners.

"Given Air Canada's strong long-term potential, we continue to recommend investors buy Air Canada shares," he wrote in a report.
Air Canada wasn't the only corporate pension plan to benefit from rising rates and asset values but the speed of the reversal caught everyone, including their CEO, off guard. Francois Shalom of the Montreal Gazette reports, How Air Canada eliminated a $3.6-billion pension deficit in under a year:
Calin Rovinescu conceded Monday that he was as surprised as others by the startling reversal of fortunes of Air Canada’s employee pension plan.

“Our expectation was that it was going to take a few years to get back to zero,” the airline president told reporters Monday after a luncheon speech to the Canadian Club of Montreal.

A plan had been put in place and into effect some years ago, and executives “always expected to settle the problem. But frankly, I would have thought it would take another year or two to get there.”

The carrier surprised observers last week by announcing that its previously ever-widening employee pension plan shortfall, a problem thought to be structural — the airline has roughly the same number of retirees as employees — had been fixed. The fund deficit that had ballooned to as much as $4.4 billion and stood at $3.6 billion less than a year ago, had been erased. In fact, Rovinescu told assembled business people, it has morphed into a modest surplus.

A “four-pronged process” combined to wipe out that deficit in under one year, he said later; reductions in early retirement provisions for some employees, which accounted for $1 billion; the “excellent (investment) fund performance” of 14 per cent; the differential in interest rates over the year; and the revised repayment schedule that Ottawa allowed Air Canada to make to the plan.

The third factor was “a big driver for us,” Rovinescu said. “We used a discount rate of 3.9 per cent, and it was three per cent at the beginning of the year. So that 0.9 per cent just shows you the level of sensitivity to the long-term bond rate.”

“Actuaries have confirmed that discount rate, so it’s basically done now,” said Rovinescu.

Air Canada’s perennially cyclical stock has also been an eye-popper. Shares in the Montreal airline jumped three-fold in 2013, making it the best performing stock on the Toronto Stock Exchange.

On the other hand, the slumping Canadian dollar has prompted the carrier and its competitors to apply a surcharge to international travel.

“And we buy all of our fuel in U.S. dollars, ... so it is for sure a significant driver,” Rovinescu said. Fuel is an airline’s single largest expense, usually between 30 and 40 per cent of total operating costs.

He noted that Air Canada typically hedges — buys in advance at a set price — about 35 per cent of its expected annual fuel consumption. But he added the airline would provide details only at the next quarterly results.

Rovinescu said he was not worried about the latest entry-into-service delay Bombardier Inc. announced recently for its CSeries airliner in development.

Air Canada is replacing the lion’s share of its fleet with Boeing Co. aircraft, including 37 B787s and five B777s. It also said recently it will buy 61 Boeing 737 MAX narrowbody airliners, an aircraft Boeing is rushing to market to counter Bombardier’s CSeries and Airbus A320 neo.

Air Canada’s 737 purchase, however, did not close the door to a possible deal for the CSeries.

Rovinescu said that his team expects to announce its decision by mid-year on whether it will buy some CSeries or other aircraft to replace older and smaller Embraer jets.

“There’s room for (the CSeries). But it’s a very complicated (150-point) analysis. It’ll be a very good airplane no matter what. The delays in and of themselves are not ... a factor for us at this stage.”

Considerations include cost, efficiencies and multiple aircraft types within one fleet.

“It’s not just about getting a good deal if you (buy) early. We’re aware of that. It may or may not work. I don’t know at this stage.”
My take on all this? I've already covered how Canadian and U.S. corporate pension plans experienced a dramatic rebound in 2013, mostly owing to the rise in long term interest rates, but the reversal of fortune at Air Canada's pension plan is nothing short of miraculous. Nobody expected them to close their pension gap this fast.

We can debate whether Air Canada deserved a pension lifeline but we can't debate the results. And it's not just about rising rates. Their investment team did an outstanding job in 2013, delivering 14%. They have adopted the same asset-liability approach that has worked so well at HOOPP and Ontario Teachers, and basically do a lot of the same arbitrage trades, variance swaps and volatility selling that the latter funds engage in.

As far as Air Canada's shares, they've been on a tear, rising from $2 a little over six months ago, to close to $10 before the latest correction (closed at $8.70 on Monday). All airline shares have been on a tear over the past year, benefiting from lower jet fuel prices and a global economic recovery.

I'm still bullish on airlines but think the extraordinary gains are over and they're due for a correction. Also, as I wrote back in December on why it's time to short Canada, the loonie will keep falling and so will Canadian energy stocks. This means Canadian airlines better hedge their fuel cost carefully or risk losing money.

And since I'm not one to hold back, I think Air Canada has a lot of work to improve its service and competitiveness in terms of pricing. To be blunt, despite massive subsidies, it's still a shitty airline with terrible service and their airfares are outrageous, especially within Canada. (It's a frigging joke! I switched to Air Transat for my direct flights to Athens in the summer because I was fed up with delays with Air Canada and their high airfares. The seats in Transat's planes are a bit tighter, the food is just as horrible but I get there on time, which is all that matters to me and my friends).

One more area Air Canada needs to improve? Diversity in the workplace. It's a federally regulated private company which enjoys millions from taxpayers and yet just like our major public pension funds and Crown corporations, it hasn't done enough to promote true diversification in the workplace (I know, I applied to their pension plan and was shut out after stating I have a mobility issue. I've experienced the same nonsense at other public and private pension funds. It's truly appalling!).

But I will give credit to my old buddy from PSP Investments, Marc-André Soublière and the rest of the team at Air Canada Pensions. They're doing an outstanding job managing a pension that was a real mess before they got there and they adopted the right strategy. I would like to see them work at a new public pension fund so they manage the pension assets of all Canadians, not just Air Canada's employees. The same goes for HOOPP, our country's best DB plan.

And let me remind my good friends at Air Canada Pensions, HOOPP, Ontario Teachers, Caisse, PSP, bcIMC, AIMCo, and a lot of other places that this blog is simply the best blog on pensions and investments out there so pay up and support it. I don't want to hear any excuses, especially from Gordon Fyfe, Michael Sabia, Leo de Bever and Ron Mock. If you only followed my advice from my short Canada piece, you would have made off like bandits, so pay up and subscribe (use the $1000 option, you can all afford it!)

Speaking or airlines and air turbulence, every market pundit has their panties tied up in knots because of the latest correction. They all need to chill out and go back to read my hot stocks of 2013 and 2014 as well as my outlook 2014. I discussed the emerging market crisis and think if it gets worse, the Fed will have no choice but to hold off on tapering or maybe even increase its bond purchases (low probability). The key threat to the global recovery right now remains deflation, not inflation, and if you think otherwise, you're in for a shocker.

Below, one of my favorite fund managers, Leon Cooperman, appeared on CNBC this morning to discuss his hunt for value. Watch the interview below and listen to him carefully, he is one of the top fund managers I regularly track every quarter. And he's right: "Corrections like this create adjective but they create opportunity." Buy the dips on the biotechs I recommended in my comment on hot stocks of 2013 and 2014 and don't forget to pay up for my advice when you score huge! (but hang on to your biotech balls and boobs, it will be a wild ride up!)

Monday, January 27, 2014

Wynne's Flawed Pension Plans?

The Waterloo Record published an editorial on Wynne's flawed pension plans:
Ontario Premier Kathleen Wynne must be getting ready for a fight. This week she brought in the big guns — former prime minister Paul Martin — to assist in her campaign for a made-in-Ontario pension system.

An election will soon be called in this province. Before that happens, Wynne needs to distance herself from the unpopular legacy of her predecessor, Dalton McGuinty. She needs to create bold policies that bear her own signature. Martin's arrival is a clear sign that Wynne means business with her pension plan. It could become her battleground.

Indeed, it's an issue that resonates. Although Canada has one of the lowest rates of elderly poverty of 17 countries in the developed world (it was 6.7 per cent in the late 2000s, better than every other country except France and the Netherlands, according to the Conference Board of Canada), there is deep anxiety among Canadians about not having dignity in retirement. With profound changes to the economy in recent decades, decent pension plans have deteriorated in a large section of the private sector, where most Ontarians make a living. Moreover, the number of senior citizens is soaring as we age. By 2030, an estimated 23 per cent of the population will be over age 65, double the percentage in 1990.

That said, Wynne's plan to set up an Ontario pension system by imposing higher payroll taxes is deeply flawed. Here are three concerns:

It's a job-killer. Now is not the time for Ontario to take even more money from employers and employees. This tactic threatens to eliminate jobs in an economic environment that remains fragile. This fragility is the reason that Finance Minister Jim Flaherty declined to increase Canada Pension contributions when recently pressed by his provincial counterparts. It is worth remembering that Martin, at a different time in his career, asserted in 1994 that "payroll taxes are a cancer on job creation."

It's a blunt instrument. The Canada Pension Plan, Old Age Security and Guaranteed Income Supplement all exist to keep seniors living in at least modest dignity. Many workers have other arrangements as well, be they private savings or employee pensions. Flaherty estimates that only one in four people are not saving enough for retirement. So why create a universal system for everyone when it is not needed by everyone?

It's a Trojan horse. Premier Wynne doesn't like to call her plan a tax. She says it's "an investment in the future." But hold onto your wallets, folks. If this happens, it won't just be the payments. Chances are we'll also be paying for a bloated duplicate version of the federal pension system. And inevitably, there will be mismanagement. After all, this is the government that thinks the answer to every problem is more government intervention and taxation. This is the government that is making us pay for its mistakes with the gas power plants, the Ornge air ambulance debacle, the green energy failure, the e-health file and soaring electricity bills. Do you really want them messing around with your pension? 
I don't know what they're smoking in Waterloo but pension policy is obviously not their area of expertise. As I stated in my last post, Ontario is sticking it to the feds and not a moment too soon. I actually think they were nice and patient with Flaherty and Harper. I would have been ruthless and gone it alone a long time ago.

The editorial above is pure garbage. It's just a bunch of scaremongering that foolishly claims the new supplemental pension plan(s) Ontario is proposing will "kill jobs." The reality is it will create jobs because as more and more people retire in dignity and security, they will spend more money in their golden years. And in any economy, it's consumption that primarily drives growth.

Canadians need to get informed on what is in the country's best interests when it comes to pension policy. They need to stop listening to those that promote myths on public pensions, warning of our two-tier retirement system, and understand that the only surefire way to cure pension envy is to introduce a universal pension plan where savings are managed by our well-governed public pension funds.

Below, Premier Kathleen Wynne has brought on former prime minister Paul Martin to assist with crafting a potential Ontario pension plan. Once again, listen to the press conference, they both understand what is at stake.

Thursday, January 23, 2014

Ontario Sticks it to the Feds!

The Toronto Star reports, Ontario recruits Paul Martin to help with provincial pension plan:
Premier Kathleen Wynne has recruited former Liberal prime minister Paul Martin to help with a “made-in-Ontario” pension plan, a clear signal the province will proceed with its own program for retirees.

But enlisting Martin — who was instrumental in saving an underfunded Canada Pension Plan a generation ago — immediately earned Wynne the enmity of Prime Minister Stephen Harper’s Conservatives.

Federal junior finance minister Kevin Sorenson, whose government’s refusal to enhance CPP has forced Ontario into considering a provincial plan, issued a blistering attack on Queen’s Park.

“Premier Wynne will disadvantage Ontario’s businesses with higher payroll taxes, killing jobs and deterring investment,” Sorenson said in a statement Wednesday.

“Employees simply can’t afford a smaller paycheque in this fragile global economy. The Liberal government of Paul Martin slashed transfers to Ontario at record levels, unlike our government that is increasing support to Ontario.”

But Wynne emphasized an Ontario pension plan, which will be a cornerstone of her Liberal campaign platform in an expected spring election, is about ensuring people save enough money to “allow them to have a dignified retirement.”

“To frame this as a taxation issue when it is an investment in the future . . . misrepresents the issue,” the premier said.

“We are both profoundly disappointed by the reticence of the Harper government to improve the CPP, but . . . as the federal government steps back, it’s our responsibility at the province to step forward.” she said.

As prime minister Jean Chrétien’s treasurer in the 1990s, Martin worked with the provinces to ensure Canadians were contributing enough to CPP to keep it viable.

“CPP premiums are premiums. They’re an investment in the future, they are not a tax,” he said, emphasizing it shouldn’t be a partisan debate.

Martin, who will work as an unpaid adviser to Finance Minister Charles Sousa, noted when the federal Liberals revamped the pension plan in 1997, Progressive Conservative treasurers Ernie Eves of Ontario and Jim Dinning of Alberta were key players.

“That is the kind of precedent that I think one would all intend to look for,” he said, adding such co-operation was crucial to salvaging CPP.

“We worked out the plan that saved the Canada Pension Plan, which makes it today one of the most actuarially sound in the world,” said the man widely viewed as Canada’s most successful federal finance minister.

“But it does have a problem. It has the problem that the premier has outlined and that is for middle-income Canadians, as you project ahead, the Canada Pension Plan is not going to be able to do that which it must,” said Martin, prime minister from 2003 until Harper defeated him in 2006.

Because CPP benefits max out at $12,000 a year, there is a need to force people to save more for their retirement years.

Harper and federal Finance Minister Jim Flaherty have spurned Wynne’s call for enhancing the national plan over concerns the requisite increases to employee and employer payroll taxes would damage the economy.

At a Meech Lake summit last month of federal, provincial, and territorial finance ministers, Ottawa rejected calls for improvements from Ontario, Prince Edward Island and Manitoba.

However, Martin said because government projections suggest employment insurance premiums could “drop” in years ahead, an Ontario pension plan doesn’t necessarily have to adversely impact paycheques.

“You can do this without affecting people’s take-home pay to any extent.”

NDP MPP Michael Prue (Beaches—East York), whose party first promised an Ontario pension plan in 2010, insisted that “appointing another adviser is just another stalling tactic” by Wynne.

“People who are worried about their retirement have heard a lot of talk from the Liberal government for 10 years, but haven’t seen any results.”

Martin and Wynne are politically close — his former chief of staff, Tim Murphy, is her campaign co-chair and his top adviser, David Herle, is managing her campaign.

“She is surrounded by, in my opinion, simply the best team that she could have,” he said. “I have huge confidence and the great advantage that they have is that they have the premier as their candidate.”
Here is my message to the federal junior finance minister Kevin Sorenson: "Eat shit!" The Harper Conservatives are on their way out and not a moment too soon.  They are a national embarrassment, shamelessly pandering to the financial services industry. It's about time Canadians wake the fuck up and smell the coffee.

I apologize for my profanity but this charade on enhancing the CPP has gone on long enough. I keep reading articles from financial services industry hacks telling us how PRPPs will close the Canadian pension gap but as I've stated plenty of times, the only surefire way to cure pension envy is to enhance the CPP and bolster the retirement system for all Canadians. Everything else, especially a private sector solution like PRPPs, is simply unacceptable and will veer Canada off the right path.

It's very simple folks. Increase CPP contributions, have the money managed by CPPIB or better yet, several well-governed public pension funds, and you will finally bolster Canada's retirement system in a meaningful way and propel us to the world's best pension spot.

And what do I think of Premier Kathleen Wynne recruiting former Liberal prime minister Paul Martin to help with this new pension plan? Great news. I hold Paul Martin in high regard and think he was one of the best finance ministers and prime ministers our country ever had. I didn't like the way his government treated Bernard Dussault, Canada's former Chief Actuary, but that is another story (the Liberals can be a lot dirtier than the Conservatives when they don't get their way).

The last time I saw Paul Martin was many years ago at Molivos, one of my favorite Greek restaurants in Montreal and one of his favorites too (Henri-Paul Rousseau also enjoyed it but that was before the scandal that rocked the Caisse). Prime Minister Martin was charming as ever, greeted me and asked me how my stepfather and mom are doing. He's a classy guy and extremely sharp (it's too bad Chretien screwed him over).

I end by inviting Paul Martin, Premier Wynne and Ontario's Minister of Finance, Charles Sousa, out to lunch. I will be in Toronto in late February to attend a conference the Healthcare of Ontario Pension Plan and others are sponsoring to discuss the impact of defined-benefit pension plans. Jim Keohane, HOOPP's CEO, will give remarks on presentations by James Tucker of and Michael Block of the Boston Consulting Group and David Herle of the Gandalf Group.

The event takes place on February 24th from 3:00 to 4:30 p.m. at the MaRS Auditorium, 101 College Street, Toronto. If you're interested in attending, contact Martin Biefer, HOOPP's Director of Public Affairs, by February 14th and see if there is any space available because it might be by invitation only (Martin's email is

Below, watch to the press conference with Premier Kathleen Wynne and former Liberal prime minister Paul Martin. Ontario's new plan is raising questions but I'm glad they are taking the lead on retirement security and hope other provinces will join in and stick it to the feds!

Tuesday, January 21, 2014

Closing the Canadian Pension Gap?

Frank Swedlove, President of the Canadian Life and Health Insurance Association, wrote a special for the National Post, Canada cannot afford to wait any longer to close the pension gap:
About one out of four Canadians are not saving enough for their retirement. These “under-saved” are mostly middle-income, private sector workers with no workplace pension plan. At the same time, persistent low interest rates have dramatically increased the amount of money they need to save to achieve financial security in retirement.

To close this gap, the recent debate has revolved around either expansion of the Canada Pension Plan (CPP) or the introduction of a new workplace savings vehicle called the Pooled Registered Pension Plan (PRPP).

However, these two approaches are by no means mutually exclusive, which explains why certain provinces are moving forward on PRPPs while still calling for a CPP expansion. Indeed, a key strength of Canada’s retirement income system is that it encompasses a mix of elements: government programs such as the CPP/QPP and OAS/GIS, public and private sector workplace pension plans, and individual retirement savings. The Ontario government, a strong supporter of CPP expansion, is nonetheless carrying out consultations with interested parties to determine how PRPPs should be implemented.

While some expansion of the CPP debate continues, we believe that moving quickly on PRPPs by all provinces should be a first priority. Since PRPPs are targeted at the 25% of Canadians who are under-saved, they impose no burden on the remaining 75%, such as low-income Canadians who are already well-served by existing government retirement programs (Canada has one of the lowest rates of poverty among seniors in the world); middle-income Canadians with adequate savings; and high-income Canadians who don’t need additional savings.

Some say that PRPPs won’t work because voluntary plans like RRSPs haven’t lived up to their potential. But this viewpoint ignores some critical differences.

First, PRPPs will be offered at the workplace, where saving is made effortless through payroll deduction. As a true pension plan, funds invested in a PRPP will not be available for withdrawal until retirement except under very specific circumstances such as loss of employment.

Second, RRSPs have not worked as well because contributions to them compete with all the other costs of day-to-day living. PRPPs, however, are deducted from pay at source. Contributions are made at a steady and easy rate, and will accumulate and be invested until retirement.

Third, due to their economies of scale, PRPPs will be delivered at low (i.e. wholesale) management fees while benefiting from skilled investment expertise and prudential management. Lower fees mean more money will accumulate towards retirement.

Finally, PRPP legislative frameworks have built-in features that will counter consumer inertia. Employees will be automatically enrolled. While they will have the choice to opt out, experience in other jurisdictions has demonstrated that very few will exercise this option.

Quebec has not only embraced PRPPs, but is moving to maximize participation by requiring all companies with five or more full-time employees to offer some form of workplace retirement plan. This will not be a burden on the employer as his or her cost to offer a PRPP will be negligible. We applaud this approach, which will have a profoundly positive impact on the future retirement savings of Quebecers. We urge Ontario and other provinces to follow suit.

Canada cannot afford to wait any longer to close the pension gap. Workplace savings plans, auto-enrolment and wholesale management fees constitute a winning combination that will help a great many people maintain their standard of living in retirement. We should implement PRPPs as soon as possible.
I agree with Frank Swedlove, Canada cannot afford to wait any longer to close the pension gap, which is why I am ecstatic to see Ontario is going it alone on a supplementary pension plan. And even though this new plan is raising questions, it's far superior to the silly PRPP proposal the federal government is banking on, foolishly pandering to the insurance and banking industry.

The insurance industry must be extremely nervous which is why they are writing articles in national newspapers desperately trying to promote PRPPs. Unfortunately, while I'm a little sympathetic to some of the arguments Swedlove raises, I feel it's my duty to systematically annihilate this article and kill off PRPPs once and for all.

First, the two approaches are not mutually exclusive but why the hell should we move quickly on PRPPs when we know they can't compete with our large, well governed defined-benefit plans? Importantly, PRPPs are not able to compete with Canada's top ten and the insurers and bankers know this, which is why they're desperately trying to ram through legislation to support PRPPs.

Second, even if I agree that saving for PRPPs is made effortless through payroll deduction, the same can be said about saving via increased contributions for the Canada Pension Plan. Increase CPP contributions, have the money managed by the Canada Pension Plan Investment Board or some new well governed public pension plan, and people will have peace of mind that their pension money is well managed and they will know they can retire in dignity and security because they will know what to expect.

The added advantage of raising CPP contributions is that all working Canadians will not have to worry about pension portability. They can move through the private sector or to public sector and their defined-benefit pensions aren't lost, especially if a company goes bankrupt.

And I just do not like anything voluntary. People will opt out the minute they need to and many won't look back. Canadians are terrible savers which is one reason why I'm short Canada and agree with Ontario Premier Kathleen Wynne that Canada is headed for a “huge economic crisis" if the provinces and federal government don't take action now to improve retirement incomes.

As I've stated plenty of times in this blog, good pension policy makes good economic policy. The benefits of defined-benefit plans are grossly underestimated and worse still, many people still believe in myths on public sector pensions.

I know Mr. Swedlove is just doing his job, promoting PRPPs on behalf of all insurers, but it's a lost cause. I highly suggest banks and insurers give up the charade and accept that PRPPs will never be able to compete with our large, well-governed defined-benefit plans. Once we kill off PRPPs for good, we can focus on closing the real Canadian pension gap between public and private sector workers, providing the latter with the same pension security the former enjoy. Enhancing the CPP is the only surefire way to cure pension envy.

Finally, the Healthcare of Ontario Pension Plan, the best defined-benefit plan in the country, invited me to an event taking place in Toronto discussing the impact of defined-benefit pension plans. Jim Keohane, HOOPP's CEO, will give remarks on presentations by James Tucker of and Michael Block of the Boston Consulting Group and David Herle of the Gandalf Group.

The event takes place on February 24th from 3:00 to 4:30 p.m. at the MaRS Auditorium, 101 College Street, Toronto. If you're interested in attending, contact Martin Biefer, HOOPP's Director of Public Affairs, by February 14th and see if there is any space available because it might be by invitation only (Martin's email is

Below, more garbage on PRPPs. Robin Pond of Buck Consultants shares insights from his sessions "Pooled Registered Pension Plans (PRPPs)" and "Pensions: Intergenerational Issues" while at the International Foundation's 2012 Canadian Annual Employee Benefits Conference.


Monday, January 20, 2014

Diversity in the Workplace?

Gary Burnison, Chief Executive Officer at Korn/Ferry International, posted a comment on LinkedIn, Labeled 'World's Ugliest Woman' – Would You Hire Her?:
Last week, I was moved by an interview on Huffington Post Live about Lizzie Velasquez. She has been labeled and ridiculed by many as the “world’s ugliest woman.”

She is a talented author and motivational speaker. She could probably be an inspiration and effective contributor to most organizations. However, in most situations, she would not have the chance to get to a final interview to be hired.

I am not condemning anyone. The facts show that we have “biases” in hiring that are natural human tendencies -- and biases are difficult to overcome.

We live in an “instant judgment” society. I know the minute I walk into a room, opinions are formed about me before I open my mouth. The same is true of every person reading this post.

Plus we form opinions just by hearing the name. If O’Sullivan and Obama both walked in the door for an interview – which one might you be prone to hire?

Don’t get me wrong. Companies and people really want to get this right. Companies today want a diverse workforce. And, they do not want one just for “diversity sake,” they want to have a workforce that is an image of their customer base. They want it for broader thinking and a wider perspective. They want the best shot, and the best process for finding and developing the best talent.

It was always odd to me that a women’s fashion company might be loaded with men in the executive ranks. It did not shock me when GM appointed Mary Barra as CEO. I wrote earlier that a study released three years ago revealed that women buy 52% of all new cars and influence more than 85% of all car purchases. So, it should really not be a surprise that GM would choose a woman as CEO. It makes total business sense to have the executive ranks mirror its customer base.

So, great companies really do fight to overcome these biases of hiring people who “look and think like us.” And, the best HR departments are working to institute hiring practices that open the door for diversity to drive excellence.

Easy to say, tough to do.

One recent example some may have read was depicted in a Wall Street Journal story on Amazon and its hiring system. It notes that Amazon has “a gantlet of people, dubbed ‘bar raisers,’ who must sign off on would-be hires.

Bar raisers are skilled evaluators who, while holding full-time jobs at the company in a range of departments, play a crucial role in Amazon's hiring process, interviewing job candidates in other parts of the company.”

Amazon is opening the door for a wide range of opinions to see if a candidate will succeed. “Succeed” in this instance goes beyond words we hear in human resources like “fit.” A person can “fit” the mold, “fit” to meet the requirements, and “fit” the culture. But they still might not succeed.

While Amazon is raising the bar, it is also inculcating a check and balance system in hiring.

An effective talent acquisition and talent development program is strategic to a business. This, of course, assumes that a company considers people its most important asset.

To assure that HR is strategic in increasing the chances that great people are identified and developed, starts with the CEO. In the Amazon story, it notes that Jeff Bezos recognized their hiring program is “something the broader team is very proud of."

Despite great human resource programs that we have seen and been privileged to help developed at companies – the question remains, can people overcome their biases to hire on ability? How do we create a system where the Lizzie Velasquez’s of the world have an equal shot at a job?

Orchestras have overcome this with blind auditions. This began in the 70s and 80s. In 1970, female musicians comprised less than 5% of players in top five US symphony orchestras; by 1997 it was 25% -- thanks to blind auditions. But while diversity is important, this blind audition process assured the hiring of better musicians.

A more current example is the television show, “The Voice.” Judges do not get to see singers, but only hear them, before the initial talent evaluation.

So, how do companies make hiring strategic?

There is no one solution. The Amazon example is one way to create a check and balance in hiring. Few companies can really have blind auditions. We suggest that companies have systems where they “try before they buy.” Is there a way to have a candidate work on a defined project? Is there a chance to collaborate with them on solving a problem? This “try before you buy” is a two-way street. The candidate gets an idea if he or she can succeed as well.

Second, get many opinions as Amazon does. While HR can guide and lead a process, great chief human resource directors do not make final hiring decisions. They guide an egalitarian process and help the decision making process by those on the line doing the work.

So, final question: do we see more if we hire without seeing the candidate?

Stevie Wonder was quoted as saying, “I am glad I am blind. I can see more of life this way.”

We need to close our eyes to biases, to open the world of possibilities.


P.S. A thank you to Lizzie – whom I have not met – but her message is an important reminder to all of us. The reference to Lizzie and excerpt below was published with permission through her publisher, Liguori Publications.

I have included a link to Lizzie’s book, Be Beautiful, Be You --

When an Internet video calling her "The World’s Ugliest Woman" went viral, Lizzie Velasquez set out to discover what truly makes us beautiful.

“After spending years wanting to look like everyone else, I realized I needed to love and accept myself just as I am. When I stopped listening to other people and started making a life for myself, I discovered my purpose in life, my passion…”
I love this post and think Lizzie Velasquez should serve as an inspiration to all of us. The morons who make fun of her have never walked a mile in her shoes and don't have her wisdom and strength.  I also love the Stevie Wonder quote at the end of Gary Burnison's comment: “I am glad I am blind. I can see more of life this way.”

Today is Martin Luther King Day so I'm going to discuss a topic that is often overlooked but critically important, diversity in the workplace. There is a great website which discusses the benefits of diversity but I'm going to share with you why I remain extremely skeptical and there is a lot of work ahead to promote true diversity in the workplace.

When people ask me why with all my experience and skills I haven't landed a job yet, I just bluntly tell them the truth, I pissed some "powerful" pension pricks off and they blacklisted me in the industry. They also continue to  illegally discriminate against me because I have multiple sclerosis and they see this as a 'weakness' or a 'liability' (they're so dumb, it's pathetic, and I'm not just talking about the Caisse and PSP).

So why don't I sue the bastards? What for? What's the use? All that money and negative energy to go work at places run by a bunch arrogant assholes who think they're important because they write big checks to the real wolves of Wall Street.

No, I'm not interested in working for or with assholes and backstabbers. Been there, done that. I think it's disgusting how some institutions treat me but I'm at a point in my life where I realize the "powerful" idiots will never change, it's all about managing their career risk and how good they look to their peers and the public. As long as they keep collecting their big bonuses, they couldn't care less about diversity in the workplace.

But I'm not happy with diversity in the workplace and give all of Canada's top ten pension funds a big fat "F" on this front. Moreover, the federal and provincial auditor generals have done nothing to highlight the miserable state of diversity in the workplace at provincial and federal Crown corporations.

I blame our laws for this. You see when you read "we do not discriminate against applicants based on race, color, religion, sex, national origin, disability or any other status or condition protected by applicable law," it's all a bunch of bullshit. These laws have done virtually nothing to promote true diversification in the workplace and there is no accountability whatsoever.

Every single Crown corporation, government organization and federally regulated private company should produce a comprehensive report on diversification in the workplace showing exactly how many women, gays, aboriginal and especially people with disabilities they're hiring. Moreover, there should be explicit programs targeting the hiring of minorities, especially aboriginals and people with disabilities, the two minority groups with the highest rate of unemployment.

Look at the senior management of any federal or provincial  Crown corporation and you will not find one person with a disability. It's actually quite scandalous. Women, blacks, gays and aboriginals have made huge inroads but there is systematic discrimination against people with disabilities which is why the unemployment rate for people with disabilities is unacceptably high, often running as high as 70% or 80% in good and bad economic times.

In my work experience, I only saw two people in a wheelchair working at low level jobs at the Business Development Bank of Canada (BDC). And there is a story behind one of the employees which I won't share publicly.  To their credit, BDC was the only Crown corporation where they had buttons to open doors, even bathroom doors, allowing their disabled employees to be more mobile. And unlike most places, BDC's HR department is doing an outstanding job but they still have a lot of work ahead to promote true diversity at all levels of their organization, especially senior management.

People don't like talking about diversity in the workplace. They think "the best people are hired at all levels no matter what" but that is a crock of shit. Politics in the workplace plays a huge role as to who gets promoted to any position, especially a senior position.

And sometimes hiring quotas work against an organization. A friend of mine reminds me of how he's seen many women get promoted to senior positions at a well-known Quebec bank and according to him, "a lot of them are completely incompetent" (can say the same thing about a lot of guys getting promoted).

Of course, Quebec is a special place. I love it here and wouldn't live in any other place, but the systematic discrimination that goes on here at government organizations and Crown  corporations against Anglos, ethnics and people of disabilities is just insane, if not criminal.

I remember when I applied to a job at Hydro Quebec and passed this two hour bullshit psychological exam. I scored highly and got called for an interview for a trader position. The managing director hiring told me I scored highly on all their exams. Then, he gave me a copy of his team's organization chart and asked me what are my origins. I told him Greek. And he then told me "comme tu peux voir, j'ai pas un ethnie dans mon équipe" ("as you can see, I got no ethnics on my team"). I looked at him and blurted "Il est temps que tu commences!" ("it's about time you start!"). I was so turned off, I never applied to Hydro Quebec ever again.

But as I stated, I love Quebec and especially love Montreal and wouldn't live anywhere else.  The petty politics drives me insane but this is a fantastic province and I really appreciate the French culture and diversity in Montreal.

I was thinking about it this morning at the gym. My trainer, Lloyd Lawrence, is a 57 year old black man who can makes guys half is age at the gym look like little girly men. Lloyd is one of the best trainers I've ever had and he really cares about his clients and seeing results. "There is nothing you cannot do man when you put your mind to it. Now, come on, give me all you got!"

I love how Lloyd pumps me up and makes me laugh. "Look at all these 25 year old guys in the gym and they can't do a tenth of what I was doing at their age. It's sad but people don't know how to train properly. They listen to a bunch of people with fancy degrees who don't know what they're talking about." I told him that is exactly what happens in the financial services industry which is why so many clueless people are getting raped on fees.

Diversity, I love it. I hired two guys to renovate my dad's condo. They both have a hearing impairment and I have to talk slowly and listen carefully when talking to them. But they're incredible, best contractors and renovators I've ever seen and would recommend them in a flash. They truly care about the quality of their work.

So, this Martin Luther King Day, I want all of you to think about how important diversity is to you and how important it is to have a truly diverse workplace. I also urge all the public pension funds to provide an annual report discussing diversity at their workplace and providing hard stats on how they are taking diversity seriously.

Below, Lizzie Velasquez was born with a rare disorder that prevents her from gaining weight. After discovering a YouTube video calling her the "World's Ugliest Woman," she chose to rise above cyber bullying and work as a motivational speaker. Watch the clips below from Huff Post Live and talk to your kids about cyber bullying. This lady is inspirational and very brave. I'd hire her in a second.

Thursday, January 16, 2014

The Pension Proctologist?

Jesse Burkhart of North Carolina's Triangle Business Journal reports, Here's how the SEC expert will dissect the N.C. pension fund:
If you were expecting quick answers as it relates to the recently launched forensic investigation into the $83 billion North Carolina state pension fund, don’t.

After speaking with Edward Siedle, the man leading the probe, he tells me that the investigation to be performed by his firm, Benchmark Financial Services, will take about three months to complete, although it could take an additional six months for the U.S. Securities and Exchange Commission to decide what to make of his findings once he presents them to the federal agency. Even then, the SEC may decide to investigate the matter itself, which could take a couple of years.

But for those eager to see what Siedle’s personal examination uncovers, get your popcorn ready.

On Friday, a public records request was made by the State Employees Association of North Carolina (SEANC) for Treasurer Janet Cowell’s office to furnish documents pertaining to investments made with money from the N.C. Retirement Systems pension fund. SEANC, the 55,000-member group committed to protecting the benefits conferred by the fund to the state’s 875,000 public workers, hired Siedle, a former SEC attorney, to identify violations of federal securities laws related to previous investment practices with pension fund money dating back to Richard Moore’s time as the state treasurer.

Once Siedle receives those documents, he will compile a 100-page report similar to the one he produced after his investigation of the $8 billion Rhode Island state pension fund, which he says revealed numerous violations of securities laws that he then reported to the SEC.

Siedle will follow the same protocol for the North Carolina fund.

“Forensic investigations of pensions are like 'CSI Miami,'” he said. “We go into a room, there’s a dead body, and the question is, did it die of natural causes, or was there foul play? Only the dead body we’re looking at is dead investments or investments that are faltering.”

The investigation will focus on identifying improprieties that include fraud, conflicts of interests, undisclosed payments or fees, excessive payments or fees, and other violations of securities laws.

To identify such improprieties, Siedle will rely on several sources of information.

The primary source will be the documents that SEANC has requested from Treasurer Cowell’s office. Beyond that, he will comb through information that he describes as being “hidden in plain view,” or information that any person can find on the internet, if that person knows what he or she is doing. And as one would expect any sleuth to have, he has “independent sources” he says he’ll tap along the way.

But for now, the process can only go as fast as Treasurer Cowell wants it to. Before Siedle can get the ball rolling, he first needs Cowell to pass it to him by supplying the documents that SEANC requested on his behalf. That’s when we can flip the hourglass on his 90-day investigation, which will offer an independent yet comprehensive view of how deep the relationship between North Carolina’s pension fund managers and Wall Street runs.
For those of you who don't know Edward "Ted" Siedle, he writes a column for Forbes and is the founder of Benchmark Financial Services. He has gone after Rhode Island's State Treasurer, Gina Raimondo, and produced a comprehensive 100-page report outlining excessive fees Rhode island paid to alternative investment managers, all part of the secret pension money grab and Wall Street's license to steal (you'll recall Ms. Raimondo is one of the heroes in Jim Leech and Jacquie McNish's book, The Third Rail, but not everyone is as enamored by her pension reforms).

I had a chance to speak to Edward Siedle last month. He immediately impressed me. He's a former Securities and Exchange Commission lawyer who investigates money managers on behalf of pension funds and he's seen it all. He also made me laugh hard when I asked him if he's a popular guy and he replied: "Let's just say in a world of cosmetic surgery, I'm a proctologist, l shine flashlights up people's asses."

Edward Siedle's latest column in Forbes, North Carolina State Workers Demand Treasurer Release Pension Records, is well worth reading:
Last week I disclosed in Forbes that the State Employees Association of North Carolina, a state workers association with 55,000 members had retained my firm to conduct a forensic investigation of the $83 billion North Carolina pension system. The good news, as reported by Jesse Burkhart in Triangle Business Journal, is that State Treasurer Janet Cowell’s office says it will cooperate with the investigation. We’ll soon find out just how forthcoming Treasurer Cowell is willing to be. Let’s hope for the best.

Public pensions are generally subject to state freedom of information statutes which should make these massive investment funds leaders in transparency. To-be-sure, I’ve never met a public pension official who didn’t claim to embrace open government. However, as public pensions swiftly moved to bail-out Wall Street post-2008 by dramatically increasing their holdings of the highest-cost, highest-risk investment products ever foisted upon unsuspecting workers, transparency has taken a body-blow.

Today public pensions have almost 25% of their assets tucked away in alternative investment funds the records as to which Wall Street and its public pension pigeons have agreed will never be disclosed to the public– including the workers who depend upon these funds for retirement security.

Wall Street, working hand-in-glove with public pensions, has thwarted public access to critical investment information by successfully arguing in state-after-state that–wait for it– copies of offering documents provided to thousands of prospective investors globally, i.e., members of the public and their financial advisors, contain top-secret proprietary business information that, if revealed to the public, would result in irreparable harm.

Across the nation public records requests related to public pension investments in hedge, venture, private equity and real estate investment have been denied. Even more ironic is the fact that the overwhelming majority of the disclosure in alternative investment documents is common boiler-plate. Trouble is, the boiler-plate toxic provisions pervasive in these agreements crafted by Wall Street are so blatantly unfair that, if revealed to the public, would spark outrage.

Secret agreements that allow mystery investors, aka hedge fund insiders, to profit at the expense of clueless state pensions? That’s precisely the type of violation of state law the documents permit.

It gets worse. In a 2012 lawsuit filed in California state court by Reuters America, Reuters argued that the state Public Records Act required disclosure of investment-return information for the university system’s $11.23 billion endowment fund. Last month, in a decision that could broadly affect how public-records laws are interpreted, the court ruled that the University of California is under no obligation to obtain and disclose information on the investment performance of venture capital funds in its portfolio.

Gotta love this: the frickin’ university claimed that it did not even have the return information in its possession. Ouch! You’d think someone at UC would wanna know whether they’re making or losing money for the endowment fund.

Never before in the history of this nation has 25% of public pension monies been sucked into a supermassive impenetrable black hole that the stakeholders, including pension participants and taxpayers, cannot possibly fathom.

In our first request for information last week, we asked Treasurer Cowell to provide the following information regarding the Teachers and State Employees’ Retirement Systems
of the State of North Carolina (“TSERS”).
  1. Please provide copies of the offering memorandum, prospectus, subscription agreement and/or investment advisory contract related to each investment (including real estate, hedge, private equity and venture capital funds) in which TSERS has invested since January 1, 2003, including any investment advisory fee waivers, “side-pockets,” or other documents amending or altering the applicable fees or terms.
  2. Please provide disclosure of the total annual fees applicable to each of TSERS’s investments since January 1, 2003, including any fund-of-fund and manager-of-manager multiple layers of fees; asset-based fees; operating fees and expenses; and performance fees by manager or fund, and disclosing each of the components of the applicable fees and expenses separately.
  3. Please provide copies of any documents related to the payment of any compensation paid to intermediaries, including but not limited to placement agents by TSERS or any of its investment managers for the period from January 1, 2003 through January 2014 and disclose with respect to each payment and arrangement, the party making the payment; the services provided in exchange for the payment; the party receiving the payment and the amount of the payment.
  4. Please provide copies of any documents related to any correspondence since January 1, 2008, between the Treasurer’s office and/or TSERS and the United States Securities and Exchange Commission; the Federal Bureau of Investigation; or any other securities regulator or law enforcement agency related to TSERS or its investments.
“We’re pleased that State Treasurer Janet Cowell has said publicly that she will cooperate with the investigation,” said SEANC Executive Director Dana Cope in a statement. “We’re taking her at her word and are ready to get started.”
As I stated above, I like Edward Siedle because he tells it like it is. I don't agree with all his views but we need more proctologists like him shining flashlights up people's asses, exposing the bullshit in hedge funds, private equity, real estate, stocks, bonds, commodities, and especially public pension funds that feed the monster aiding and abating Wall Street's license to steal.

By the way, every single pension fund I cover on my blog has dirty secrets they do not want you to know about, every single one of them (some are just better at hiding their skeletons than others). And when I get people contacting me from all over the United States telling me about shady or illegal activity at their public pension fund, I just tell them to contact Edward Siedle at Benchmark Financial Services (his email is He's always looking to sink his teeth into fraudulent or questionable activity.

As far as North and South Carolina, they and many other public pension funds are praying for an alternatives miracle that is unlikely to happen. CalPERS, the largest U.S. public pension fund, is desperately trying to revamp its private equity portfolio following the scandals that rocked their fund but Réal Desrochers and his team still have a lot of work ahead of them to clean up that mess.

Finally, one pension expert shared the following with me:
The problem is returns needed to make the pension math work are pretty hard to achieve over the long term, which lead to more complicated return generating ideas, and doing more complicated investments costs fees, or more internal costs, really the same thing. It costs a lot simply to try to generate superior returns, let alone actually succeeding in doing so.
If you want to end the search for high returns, double the contribution rates, half the benefits, and you can go back to simpler portfolios like the good old days. If workers/unions/pensions/Boards want the illusion of a free lunch from the market simply by taking risk and expecting returns, then don’t get mad at or blame the people and machinery that serves those desires.
It’s really all about governance, and in the instances of pensions, making promises one can actually keep. Bringing in the proctologist is fine, but a nutritionist to revisit what you should eat and why in the first place might be more productive.
Below, a March 2012 Bloomberg clip with Edward Siedle of Benchmark Financial Services. I hope to see his business flourish because there is a real need to investigate not only money managers but also public pension funds engaging in risky and shady activity.

And take the time to read my recent comment on the real wolves of Wall Street and how they dump structured crap in your pensions. I need to write my book, and hopefully Edward Siedle and a few others can contribute because too many people are clueless on the shenanigans going on in Wall Street and public pension funds that feed the monster.