Pension Pulse

Before I get into my latest comment, I want to share with you a discussion I had Saturday night with a trader called "Joe." I knew his wife back in college and ran into him last year at this time at the airport when I was leaving for Greece. Joe is somewhat of a legend among Montreal's trading community. A proud Italian-Canadian, he started trading in his teens and never stopped. He's self-made, very successful, and he knows what he's talking about when it comes to managing money. He's one of those few guys that nobody knows about who has made a small fortune trading stocks and futures -- and he did it all on his own. I have a lot more respect for a self-made, anonymous, and humble trader like Joe than many arrogant pricks in high finance that take themselves so seriously because of their titles. In this business, titles are bullshit. Show me what you can deliver, what you have actually accomplished on your own, not the chair you're sitting on right ...

My favorite Greek-American whistleblower, Harry Markopolos, is back at it, exposing how big banks are ripping off pension funds : Amid all the market volatility and weakness in the financial sector of late, you may have missed this WSJ front page story: "States Go After Big Bank on Forex". The story is about growing scandal in the banking industry centered around banks allegedly overcharging pension funds for currency transactions. "Attorneys general in Virginia and Florida filed civil suits against BNY Mellon alleging that the bank cheated pension funds in those states by choosing improper prices for currency trades the bank processed for the funds," The WSJ reports. "The Virginia lawsuit, filed in a Fairfax, Va., state court, cites internal bank emails allegedly showing that senior bank officials knew about, and endorsed, a currency-trading method that hurt state pensioners." In addition to Virginia and Florida, California and Tennessee are ...

Thursday's market drop marked the fifth time in just two weeks that the Dow Jones industrial average rocketed up or down by several hundred points in one trading session. Below, Spencer Michels reports on how the California Public Employees' Retirement System, one of the largest U.S. institutional investors, is handling the volatility. Please pay close attention to what CalPERS' CIO, Joe Dear, says about high-frequency trading and how he worries more about the European debt crisis, two topics that I covered on Thursday here and here . I thank Jack Dean of PensionTsunami.com for forwarding me the interview below. It's clear that global pension funds, sovereign wealth funds, insurance funds, endowment funds, mutual funds, hedge funds have all suffered savage losses in the last few weeks. And my gut tells me they're going to be buying high beta stocks to make up for these losses. But Europe has to get its act together or else it's pretty much downhill fro...

Special 2 for 1 this Thursday. Here is why I don't believe "markets are always right." They are rigged so the hungry wolves make off like bandits! And now we find out that a SEC whistleblower claims that over the past two decades, the agency has destroyed records of thousands of investigations, whitewashing the files of some of the nation's worst financial criminals (HT: Paul Kedrosky): Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – "Hey, chief, didja know this guy had two wives die falling down the stairs?" No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where ...

Yahoo Daily Ticker interviewed Rupal Ruparel of London-based think-tank OpenEurope , stating End Game Approaching in Europe: No Way Out But Debt Restructuring : For two years now, Eurozone leaders have tried to deny reality, concocting one temporary bailout scheme after another in an effort to sweep Europe's budget problems under the rug. But this game is nearing its end, says Rupal Ruparel of London-based think-tank OpenEurope. A crisis that began in countries like Greece that seemed too small to worry about has now spread to countries like Spain and Italy that are big enough to take the whole Eurozone down. The only way to actually solve the problems, says Ruparel, is to acknowledge the facts: "Austerity" programs won't help countries pay back their debts. Either the whole Eurozone has to combine its fiscal spending--a solution in which German taxpayers would pay for Greece's deficits--or the debts have to be restructured. Ruparel believes the ...

I am a lot more focused on markets and trading than on pensions. I will come back to pensions, but today here is some food for thought by Chris Ciovacco of Ciovacco Capital Management on why the Stock Market’s Death Cross Looking More Deadly This Time: A “death cross” is when the 50-day moving average crosses below the 200-day moving average. One just occurred on the S&P 500 Index. The slang term tells you it is not considered to be a bullish signal. In a July 4, 2010 article Stocks May Surprise By Year End , we wrote: The “Death Cross” Is Not So Deadly: The “death cross” formation historically has resulted in a 0.4% drop in the S&P the month after, but the market traditionally gains nearly 5% in the ensuing six months, according to a Wall Street Journal report Thursday. A 5% gain in six months is hardly “deadly”. We agree a “death cross” is not a good thing, and it does indicate a weakening market. However, all technical systems need to be viewed in the light of...

Yahoo Daily ticker reports, Dow Ends One Of Most Volatile Weeks in History Basically Flat — So What’s Next? : The past seven trading sessions have been nothing short of remarkable. Last Thursday, after a couple of weeks of steady but relatively normal declines, the Dow suddenly tanked 500 points. Then, after a modest recovery on Friday, it fell 600 points. Then it soared 400 points. Then it plunged 500 points. Then it blasted off to another 400 point gain. And, today, after another 100+ point gain, it appears poised to end the week down, but within a couple of hundred points from where it started the week. What gives? Is this wild volatility the start of another massive market crash, along the lines of what happened in 2007-2009, or 2000-2002? Or was it just a "correction" -- sharp and scary, but now over and done? No one knows, but Aaron and I think the risks are still to the downside . The market's initial plunge was triggered by the European solvency cri...

Finally, someone who makes some sense! David Kotok of Cumberland Advisors was interviewed on Yahoo Daily Ticker stating, Forget 2008, This Is Like 1987 : After dramatic moves in the futures markets, U.S. stocks opened higher Thursday morning after European bourses reversed early declines. The primary focus of concern — as it was yesterday - is French banks. Societe Generale initially rallied after its CEO denied rumors the bank faces a funding crisis, then plummeted anew amid reports Asian banks are cutting credit lines to major French institutions. Other French banks such as BNP followed suit, dragging major European bourses lower before mounting a major recovery effort. Did somebody say "fast markets"? While some observers are drawing comparisons to 2008, David Kotok, chairman and chief investment officer at Cumberland Advisors, says the current environment reminds him of 1987. That year, U.S. stocks suffered "60 brutal days ending Black Monday," he...

Did I ever share with you the story when my humble father received a call at home from the emergency room at the Royal Victoria Hospital about one of his psychiatric patients? We were getting ready to eat dinner when the phone rang and I overheard him: "Ah huh, hmm, I see, I see, OOOOKKAAAY, INCREASE THE DOSAGE!" At the time I found it humorous and kept teasing him that "it must be really easy being a shrink, all you need to do is increase the dosage." He didn't find it funny at all. Just like I don't find any humor in these schizoid markets. The volatility this week proves to me that the wolves are hungrier than ever and are engaging in ever more deceitful, manipulative techniques to bring this market lower and scare investors to death. Fear returned to Wall Street on Wednesday, sending the S&P 500 to another 4 percent decline, triggered by worries that Europe's debt crisis could engulf French banks and spill onto the U.S. financial sect...

What an amazing trading day. If you played it right, you could have made a killing during Tuesday's session. This is my new motto: you will never beat the sharks on Wall Street engaging in high-frequency trading with their multi-million dollar computers based on insanely complex algorithms, so you are much better off joining them. Actually, I lied, you can beat these 'hedge fund' punks but you got to stomach insane volatility in the process and trade without fear. You have to be crazy and ready for cliff diving. Not exactly recommended for the average investor looking to buy and hold and collect 6% a year with little risk. And while it sounds easy, be prepared to lose a ton of money before you start making it back. I have the advantage of knowing where hedge funds hide, what they liquidate and buy when they are in 'RISK OFF' and 'RISK ON' mode, and when to buy or sell given the macro background. Remember this: traders love selling the news and buying ...