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Showing posts from January, 2018

America's Pension Shithole?

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Reuters reports, Illinois pension mega-bond sale idea gets legislative airing:
Illinois lawmakers on Tuesday expressed interest and skepticism in an idea that the U.S. state should sell $107 billion of bonds to address its huge unfunded pension liability.

At a hearing before the Illinois House Personnel and Pensions Committee, Runhuan Feng, an associate professor of mathematics at the University of Illinois, laid out a plan for selling taxable 27-year, fixed-rate bonds to get the state’s five retirement systems to a 90-percent-funded level.

The bond plan, which was offered by a group representing workers and retirees in the Illinois State Universities Retirement System, would result in a $103 billion reduction in the state’s pension costs by 2045, according to Feng.

Committee Chairman Robert Martwick filed a bill for the bond sale, emphasizing that it was in early in the process and promising to bring in bond market and other experts to testify.

In order to become law, the bill would …

CPPIB's Big Investment in Chinese Properties?

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Rajeshni Naidu-Ghelani of CBC News reports, CPPIB to invest $800M in Chinese real estate developments:
The Canada Pension Plan Investment Board (CPPIB) will invest $800 million in two new property developments in China by developer Longfor Properties, it announced on Monday.

The projects include a 740,000 square metre residential and commercial development in Western Chinese city Chengdu. The city has a population of 16 million.

The other is a 340,000 square metre development in South Minhang, which is a suburb of financial capital Shanghai.

The developments will both include a shopping mall.

"Both cities are well positioned to capitalize on the future economic growth and harness the returns of growing consumption in China," said Jimmy Phua, head of real estate investments Asia, CPPIB.

He added the move was part of the pension board's strategy to grow real estate investments in China, particularly in the fast-growing retail sector.

"The investments will help CPPIB di…

How Scary Is The Bond Market?

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Brian Romanchuk of the Bond Economics blog posted a comment over the weekend, Bond Bear Market Scare Stories (added emphasis is mine):
Whenever there is an uptick in bond yields, scare stories about a coming secular bond bear market are not far behind. The problem with most of these stories is that they are not particularly compelling, and different people have been invoking variations of them for decades. Instead, if you want to come up with a much scarier bond bear market scenario, we need to drop some analytical assumptions, and think through the implications.

The Lame Scare Stories

Each commentator comes up with a different spin on why the Treasury market is about to collapse, and what the implications are. I cannot hope to cover them all. However, there are a few basic stories that quite often appear. Unfortunately, if we want to translate them to a (highly dated) pop cultural reference, they are about as scary as Dr. Tongue's Evil House of Pancakes.

Since I am only summa…

The Danger of Irrational Complacency?

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Jeff Cox of CNBC reports, An indicator with a perfect track record just sent a 'powerful' sell signal:
The relentless gush of cash into the stock market is sending a powerful "sell" signal, according to a Bank of America Merrill Lynch gauge that has been a reliable indicator in the past.

Investors poured $33.2 billion into stock-based funds through the week ended Wednesday, BofAML said in a report. That's a record both for total flows and as well as for active funds, which alone pulled in $12.2 billion.

By comparison, equity funds across all classes took in a net $278 billion for all of 2017, according to Morningstar, meaning that last week alone equated to 12 percent of flows for the entire previous year.

The week continued a trend that has seen money rush into stocks as major averages climb to new records. The Dow Jones industrial average is up 7 percent year to date.

While the inflows have helped push the market higher, they also can be seen as a contrary indicat…