Showing posts from March, 2014

Is the U.S. Stock Market Rigged?

Steve Kroft of CBS 60 Minutes reports on a new book from Michael Lewis that reveals how some high-speed traders work the stock market to their advantage:
This month marks the fifth anniversary of the current bull market on Wall Street, making it one of the longest and strongest in history. Yet U.S. stock ownership is at a record low and less than half of Americans trust banks and financial services. And in the last two weeks, the New York attorney general and the Commodities Futures Trading Commission in Washington have both launched investigations into high-frequency computerized stock trading that now controls more than half the market.

The probes were announced just ahead of a much anticipated book on the subject by best-selling author Michael Lewis called "Flash Boys." In it, Lewis argues that the stock market is now rigged to benefit a group of insiders that have made tens of billions of dollars exploiting computerized trading. The story is told through an unlikely ca…

Do Pensions Pay Political Dividends?

Martin Regg Cohn of the Toronto Star reports, Ontario Pension Plan may pay political dividends:
Beyond the usual rhetoric, a most unusual platform is taking shape in the Liberal campaign shop. Ahead of a possible spring election, Premier Kathleen Wynne has seized on a sleeper issue for her political revival:

Pension reform.

Improbably, pensions now dominate her political speeches. Her strongest attack lines have targeted Prime Minister Stephen Harper for blocking Canada Pension Plan improvements.

“If you (Harper) won’t lead the way, then get out of the way,” she told cheering Liberals at a weekend convention.

“We must act now to stave off crisis in our retirement income system,” Wynne exhorted donors at a major party fundraiser 48 hours before.

Wynne is right to lament the lack of federal leadership on CPP improvements. Building a new Ontario Pension Plan is worthy public policy.

But is it a political winner?

The answer could be heard at an invitation-only seminar convened this month b…

New Jersey's Pensiongate?

Lee Fang of The Nation reports, Pensiongate? Christie Campaign Donors Won Huge Contracts:
Four months into his first term, Governor Chris Christie stood at the podium of the Manhattan Institute, a conservative think tank, and laid out what was billed as the “Christie Reform Agenda.” To enthusiastic applause, the New Jersey governor railed against what he described as an out-of-control state public pension system. “Our benefits are too rich, and our employees aren’t contributing enough, either,” he said. “We are careening our way toward becoming Greece.”

Christie had just won his first statewide election with the help of Paul Singer, the hedge fund manager who chairs the Manhattan Institute. The month before Christie’s election victory in November 2009, Singer had given $100,000 to the Republican Governors Association (RGA), which aired a barrage of advertisements in Christie’s favor.

In that campaign, among Christie’s lines of attack against incumbent Democrat Jon Corzine was that he …

Raging Fire at Tampa's Hot Pension Fund?

In my last comment, I wrote about the pension fund that broke all rules, praising the Tampa firefighters and police officers pension fund for their stellar outperformance using one investment manager. Turns out, they may indeed be breaking a lot more rules than I first thought.

Chris Tobe, author of Kentucky Fried Pensions and now senior consultant at the Hackett Group, alerted me to two articles written by Ted Siedle, raising some disturbing red flags on the Tampa firefighters and police pension fund:
I have two words of advice for firefighters and cops who participate in the City of Tampa Firefighters and Police Pension: Watch Out. While I cannot say for certain that your pension’s assets are being mishandled without further investigation, there are ample “red flags” present and I believe an independent forensic review should be undertaken of the fund.

Based upon the documents that I have reviewed, in my opinion, it is impossible for participants in the fund to assess the integri…

The Pension Fund That Broke All Rules?

James Stewart of the New York Times reports, A Pension Fund Invests Against the Rules, and Wins:
Are the trustees of the Tampa firefighters and police officers pension fund out of their minds?

“Quite a few people tell me we’re crazy,” Richard Griner, a 41-year-old Tampa police detective and vice chairman of the pension fund’s board, told me this week. “I go to quite a few investment conferences. They just can’t believe that we do this the way we do. But then I tell them the numbers, and they tend to shut up.”

The Tampa, Fla., pension fund may be unique in its approach to managing its assets, which totaled $1.76 billion as of last September. Unlike the so-called Yale model, which has been widely copied and stresses alternative investments, the Tampa fund has no hedge fund or private equity investments.

But neither does it follow the low-cost, index-oriented approach championed by Vanguard and others. The Tampa fund doesn’t own index or mutual funds.

As for being diversified, which is the…

Wynne Harpoons Harper on Pension Reforms?

The Canadian Press reports, Kathleen Wynne takes aim at Harper over pension reform:
Ontario Premier Kathleen Wynne is putting Prime Minister Stephen Harper in her crosshairs as she girds for a possible spring election.

Addressing the party faithful in Toronto, she says his opposition to pension reform is somewhere between "offensive and inexplicable."

Wynne clashed with Ottawa last year over its refusal to boost the Canada Pension Plan, and has said she will introduce plans for a new, separate pension plan for Ontarians this year.

"It is somewhere between offensive and inexplicable to ask the people who worked hard all their lives to be rewarded with retirement that takes them out of the middle class," Wynne told the crowd. "That might be Stephen Harper’s way, but it is not our way. It is not the Liberal way.”

But Wynne also took a page from Harper's election playbook, painting her provincial Liberals as the safe, steady alternative to the reckless Tories …

The Hedge Fund Curse?

Matt Phillips of Quartz reports, Hedge funds bet big on GM and now the stock is getting creamed:
Not long ago, hedge fund managers were deeply in love with General Motors.

Goldman Sachs equity analysts said the stock appeared the most frequently among the largest 10 holdings of hedge funds it examined, making it a more important position than Google or Apple. At the end of 2013, nearly 200 hedge funds owned GM, more than any other stock held by the nearly 800 hedge funds Goldman analysts looked at.

And then this happened (click on image).

The underperformance of GM shares isn’t a big mystery. An unsettling recall that the automaker issued in February is largely to blame. But it’s a useful reminder that even financial titans don’t call everything right.

Now, we should point out that the stock is still up about 25% over the last 12 months, slightly better than the 21% gain the S&P produced. So how funds fared on their GM bets depends a lot on when they got into the stock. For insta…