Showing posts from June, 2010

Calpers and Risk: Together Forever?

Kit Roane of Fortune reports, Calpers and risk: Together forever? (HT: Bill Tufts, click on link for full article): Before clocking a $100 billion loss in early 2009, the California Public Employees' Retirement System, known as Calpers, had the swagger of a hedge fund and the certainty of a saint. Other pension funds followed its lead, loading up on leverage, investing in unrated CDOs, shoving money into high-priced private equity deals and barreling into commodities and real estate. The question now is whether a loss of nearly 40% of its market value -- the worst loss in the system's 77-year history -- has brought Calpers sufficiently back down to earth to avoid another such debacle, and whether other chastened pension systems have followed suit. In truth, not all of the evidence of a rebirth at Calpers is comforting. And in the case of some other underfunded pension funds, their latest financial bets look downright scary. "Some pension plans are evidently ho

Preparing for Next Big One?

Before getting into my latest topic, a follow-up on my last comment. Mike Shedlock wasn't impressed, calling me " another Keynesian clown ": I am sick of Keynesian clowns who do not know the cart from the horse, who think debt is a free lunch, who think spending and debt are the ways to get out of debt problems and most of all never say how this debt is going to get paid back. What causes depressions is an unsustainable run-up in credit and debt that precedes it, NOT a failure to go deeper in debt. Anyone who understands 5th grade math should be able to figure that out. Unfortunately, Nobel prize winning economists can't. "I listen to nonsense from some commentators claiming that if the US is not careful, it will suffer the same fate of Greece. Total rubbish." says Kolivakis. Three Examples of Total Rubbish People who think crack addicts can smoke crack to cure their addiction Alcoholics who think they can drink their way out of alcoholism Debt junkies (and

The Third Depression?

Jim Randle reports, G20 Leaders Pledge to Cut Government Deficits : Leaders from the world's 20 most important economies set targets to slash government deficits, haggled over tougher financial regulations and compromised on a proposal to tax banks. The G20 meeting wrapped up Sunday in Toronto. G20 leaders say the global economic recovery is fragile and faces serious challenges, including growing government deficits. The Greek crisis showed how large deficits can make lenders worry that they will not be repaid, and keep them from making the new loans, stalling the economy. Canadian Prime Minister Stephen Harper urged his colleagues in advanced nations to cut their deficits in half in three years, but also urged them to make cuts with caution. "Here is the tight rope that we must walk," he said. "To sustain recovery it is imperative that we follow through on existing stimulus plans those to which we committed ourselves last year but at the same time adva

Gauging the Risks of Recession

Advisor Perspectives published John Mauldin's latest weekly comment, Risk of Recession . It's an absolute must read, and I highly suggest you read it all, but I will focus in on the following: Jonathan Tepper (coauthor of the next book I am working on) sent me this piece from a group called EMphase Finance , based in Montreal. They wrote this back in April, as the Weekly LEI was beginning to turn over. They have found a bit of data that seems very good at predicting the economy of the US 12 months out. Let's take part of their work: "Many market participants are debating whether or not a double-dip recession will occur within the next quarters. As we are writing our report, ECRI Weekly LEI fell quickly to 122.5 points from 134.7 in April. This indicator did a good job leading U.S. Real GDP Y/Y by 6 months over the last two decades. However, ECRI Weekly LEI recently became quite unreliable as it increased up to 25% Y/Y in April, a level consistent with an unrealistic 8%

"New Austerity" Threatening Global Recovery?

Earlier this week, George Soros said German fiscal policy endangers the European currency union : “The German policy is a danger for Europe, it could destroy the European project,” Soros was quoted as saying. “If the Germans do not change their policy, their exit from the currency union would be helpful for the rest of Europe,” he added, according to the report. Soros also said that one “can’t rule out a collapse of the euro,” Die Zeit said. Collapse of the euro? Obviously Soros is short euros, but he's not the only one concerned about Europe's fiscal policies. In counterpunch's weekend edition, Michael Hudson writes, Europe's Fiscal Dystopia: the "New Austerity" Road : Europe is committing fiscal suicide – and will have little trouble finding allies at this weekend’s G-20 meetings in Toronto. Despite the deepening Great Recession threatening to bring on outright depression, European Central Bank (ECB) president Jean-Claude Trichet and prime ministers fr

Close But No Cigar!

Angela Charlton of the Boston Globe reports, French prime minister urges big cost-cutting : France's Prime Minister Francois Fillon on Friday rebuffed unions angry over plans to raise the retirement age by two years, urging the French to show "courage" and make an unprecedented effort to cut the enormous national debt. The government said Friday it's considering freezing public sector salaries for the next three years -- a prospect that prompted unions to slam the door on salary talks with the labor minister in protest. Unions are energized after nationwide strikes and protests Thursday that brought nearly a million people to the streets to protest President Nicolas Sarkozy's bid to reform a money-losing pension system. The reform includes raising the retirement age from 60 to 62 -- which would still be among the lowest in Europe. Fillon defended the pension reform at a news conference hastily arranged after Thursday's protests. Fillon said he &q