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Showing posts from November, 2014

Prepare For a Deflationary Boom?

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Jon D. Markman of Yahoo Finance reports, Prepare for the rare “deflationary boom”:
"Deflation" and "boom" are not two words that normally go together. They are almost like "sad happiness," "low-cal donut." But in their very unlikely pairing they appear to do a good job of explaining the unusual economic and market environment that may lie ahead.

It’s a term discussed this week by Cornerstone Macro analyst Francois Trahan to describe a rare condition in which a country’s economic activity rises but inflation falls. He believes that is the right interpretation of the Philadelphia Fed data released on Tuesday that showed output in the region up but prices paid falling, as shown in the chart below.


The improvement of the Philly Fed can be seen in part as a result of the stimulative effect of falling crude oil prices, and their ripple effect on the broad economy. The chart below, created by Cornerstone, shows the Philly Fed Index (green line) charted …

Ontario Teachers and PSP Nearing Telesat Deal?

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Alex Sherman of Bloomberg reports, Canada Funds Said Nearing $7 Billion Telesat Deal:
Ontario Teachers' Pension Plan and Public Sector Pension Investment Board are nearing a $7 billion deal for Canadian satellite company Telesat Holdings Inc. after months of delays and discussion breakdowns, people with knowledge of the matter said.

Under the terms being discussed, the funds will acquire Loral Space & Communications Inc. (LORL), a publicly traded shell company that owns 63 percent of Telesat, for about $85 a share, or $2.6 billion, said the people, who asked not to be named discussing private information. While a deal could be announced next month, talks may fall apart again given the parties’ inability to reach an agreement in the past, the people said.

The pension funds are planning to wind up with equal ownership and voting stakes in Telesat, the people said. PSP, which currently holds about 67 percent of the voting rights and 37 percent of the equity in Telesat, would inc…

New Jersey's Pension GASBing for Air?

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Hilary Russ of Reuters reports, New Jersey pension system funding plummets under new rule:
New Jersey's retirement system for public employees is in worse shape than previously reported, thanks to recent accounting changes that are starting to be rolled out across the country.

In a document released on Tuesday after a bond sale, the state revealed that one of its five main pension funds will have insufficient assets to cover projected benefit payments within 10 years.

Under new pension accounting standards, issued by the Government Accounting Standards Board (GASB), the New Jersey system's overall funded level stands at 44 percent for fiscal 2014, compared to the 63 percent previously determined by standard actuarial methods. Eighty percent or more is generally considered healthy.

In the face of a budget crisis in May, Governor Chris Christie, a potential 2016 Republican presidential candidate, slashed two years of state pension contributions by about $2.5 billion altogether, p…

U.S. Public Pensions on Solid Footing?

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Business Wire reports, Public Pension Plans Report Solid Returns, Financial Strength, Increasing Confidence:
Confidence continues to rise among public pension plan administrators about the sustainability of their funds and their readiness to address future retirement issues, according to a new survey by the National Conference on Public Employee Retirement Systems (NCPERS).

The 2014 NCPERS Public Retirement Systems Study also shows continuing financial strength for public funds, with healthy long-term investment returns.

“Once again, our annual survey provides convincing evidence that the vast majority of public pension plans are financially sound, well-funded and sustainable for the long term,” said NCPERS Executive Director and Counsel Hank Kim, Esq. “It also demonstrates that defined benefit public pension plans are the least costly way to ensure retirement security for American workers.”

Partnering with Cobalt Community Research, NCPERS surveyed 187 state, local and provincial gov…

Caisse Sours on Debt?

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Frederic Tomesco of Bloomberg reports, Caisse Sours on Debt With Yields at Record Lows:
Caisse de Depot et Placement du Quebec, Canada’s second-largest pension fund manager, is losing its enthusiasm for bonds with yields close to record lows.

“Fixed income isn’t what it used to be,” Chief Executive Officer Michael Sabia, said yesterday in an interview at Bloomberg headquarters in New York. The manager of about C$215 billion ($190 billion) in assets anticipates reducing its holdings in bonds to around 30 percent over the next two years from about 35 percent, he said.

Bonds worldwide have returned 6.3 percent this year, the most since 2002, according to the $46 trillion of debt securities included in the Bank of America Merrill Lynch Global Broad Market Index. The rally, prompted by central banks in the U.S., Europe and Japan keeping borrowing costs close to record lows to spur growth, pushed average yields globally to a record-low 1.51 percent last month.

Sabia said he may reallocate sov…

Are Central Banks Panicking?

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Koh Gui Qing and Jason Subler of Reuters report, China surprises with interest rate cut to spur growth:
China cut interest rates unexpectedly on Friday, stepping up efforts to support the world's second-biggest economy as it heads towards its slowest expansion in nearly a quarter of a century.

The cut, the first in over two years, came as factory growth has stalled and the property market, long a pillar of growth, has remained weak, dragging on broader activity and curbing demand for everything from furniture to cement and steel.

"It's comes right after China's disappointing PMI figures showing that manufacturing activity is getting dangerously close to contraction," said Alexandre Baradez, chief market analyst at IG in Paris, referring to a private factory survey this week which added to worries about slowing global growth.

"China's central bank is now following the path of the Fed, the ECB and the BoJ. Central banks are really driving markets," he …