Pension Pulse

Earlier this week, Ed Yardeni posted an interesting blog comment, Janet in Wonderland (added emphasis is mine): Borio vs Yellen. Last Wednesday, Fed Chair Yellen, in her press conference following the latest FOMC meeting, reminded me of Alice in Wonderland. She wondered why inflation remained so curiously low. In the world that she knows, ultra-easy monetary policy should stimulate demand for goods and services, lower the unemployment rate, and boost wage inflation, which would then drive up price inflation. Since the time Yellen became Fed chair on February 3, 2014 through today, the unemployment rate has dropped from 6.7% to 4.4% (from February 2014 through August 2017). Yet over that same period, wage inflation has remained around 2.5% and price inflation has remained below 2.0%. Yellen expected that by now wages would be rising 3%-4%, and prices would be rising around 2% based on the inverse correlation between these inflation rates and the unemployment rate as posited ...

Alan Johnson of The Columbus Dispatch reports, Ohio’s public-employee pensions face cutbacks : Public-employee pension funds are big business in Ohio, providing a safety net for 1.75 million people. There’s a lot riding on them. Collectively, Ohio’s five public pension funds have $192 billion in assets and last year paid out more than $15 billion in pension benefits and $1.1 billion in health-care benefits. They are not required by law to provide health insurance, but all five do. Whether they will in the future is uncertain . Although the funds have been mostly reliable and financially sound for decades, recent economic downturns, soaring health-care and prescription-drug costs, and the increased longevity of retirees have taken a toll. Several of the funds are reducing or eliminating cost-of-living adjustments, cutting subsidies and increasing health-care premiums. The five funds are the Ohio Public Employees Retirement System (public workers); State Teachers Retirement ...

Nir Kaissar of Bloomberg reports, Steve Cohen's Dubious Rerun : Don’t call it a comeback just yet. As Bloomberg News reported on Tuesday, hedge fund manager Steven A. Cohen is preparing to raise as much as $10 billion from outside investors in 2018 for a new fund. Combined with his personal fortune of $11 billion, the fund could oversee more than $20 billion, which would make it the largest U.S. hedge fund launch in history. Do It Again It would also mark an extraordinary turnaround for Cohen. Just four years ago, he made history in all the wrong ways. His hedge fund firm at the time, SAC Capital Advisors LP, was charged with insider trading. The firm pleaded guilty and paid a record $1.8 billion penalty . In addition, six current or former SAC employees were convicted of various criminal charges related to insider trading. Cohen was never charged with insider trading, but the Securities and Exchange Commission did accuse him of failing to supervise misbehaving emplo...

Jack Dolan of the Los Angeles Times reports, UC is handing out generous pensions, and students are paying the price with higher tuition : As parents and students start writing checks for the first in-state tuition hike in seven years at the , they hope the extra money will buy a better education. But a big chunk of that new money — perhaps tens of millions of dollars — will go to pay for the faculty’s increasingly generous retirements . Last year, more than 5,400 UC retirees received pensions over $100,000. Someone without a pension would need savings between $2 million and $3 million to guarantee a similar income in retirement . The number of UC retirees collecting six-figure pensions has increased 60% since 2012, a Times analysis of university data shows . Nearly three dozen received pensions in excess of $300,000 last year, four times as many as in 2012. Among those joining the top echelon was former UC President Mark Yudof, who worked at the university for only seven yea...