Pension Pulse

The NYT reports that Fed Move May Signal End to Easy Bank Profits : Federal reserve to Wall Street: The days of easy money — and, just maybe, easy profits — are numbered, Graham Bowley and Eric Dash report in The New York Times. News on Thursday that the Fed would raise the interest rate that it charges banks for temporary loans was seen by lenders as a sign that their long, profitable period of ultralow rates was coming to an end. The move suggested that policy makers believed the nation’s banks had healed enough to withdraw some of the extraordinary support that Washington put in place during the financial crisis. And, while all those bailouts stabilized the banking industry, it was low rates from the Fed that helped propel banks’ rapid recovery. Even though the Fed had telegraphed its intention to raise the largely symbolic discount rate, the timing of the move, coming between scheduled policy meetings, caught some economists by surprise. Stocks and bonds sank in after-hours trad...

What a hockey game between Team Canada and Switzerland. The Swiss really played well and it went into overtime, and then a shootout where our star, Sidney Crosby, scored the game winner . If we play like that against the Russians, they're going to have us for lunch. Hockey is a game of momentum and when the tide shifts, you could find yourself in an awkward spot very quickly. This brings me to tonight's topic. At 4:30 this afternoon, I received the now famous release from the Federal Reserve : The Federal Reserve Board on Thursday announced that in light of continued improvement in financial market conditions it had unanimously approved several modifications to the terms of its discount window lending programs. Like the closure of a number of extraordinary credit programs earlier this month, these changes are intended as a further normalization of the Federal Reserve's lending facilities. The modifications are not expected to lead to tighter financial conditions for hous...

I promised to shift my focus back to pensions. Jack Mintz wrote an article yesterday in the National Post claiming that the pension crisis is a myth : The myth that the pension system is in crisis grew out of the 2008 financial crisis. Canadians saw an average 20% loss in their portfolios. Pension plans had a similar experience with some becoming insolvent. Nevertheless, a 2009 DBRS survey of 70 defined benefit plans showed that most pension plans were in relatively good shape. The OECD has ranked Canada’s pension system as one of the most sustainable in the world with elderly Canadians having disposable income equal to 95% of working Canadians, third highest of industrialized economies. The poverty rate among the elderly — less than 5% — is one of the lowest among OECD countries Household net worth at the end of the third quarter of 2009 is six times disposable income, roughly the same as in 2000 at the height of the high-tech boom. Canadians have $5.9-trillion in net assets, includin...

This will be the final comment on my Greek trilogy before I move back to covering pensions. Greg Bryanski of the Globe and Mail reports that Putin calms Greece, says U.S. debt big too : R ussian Prime Minister Vladimir Putin played down Greece's economic woes on Tuesday, telling his visiting Greek counterpart that the United States were no better than Greece in handling its debt and fiscal deficit. “As we all know, the global economic crisis started neither in Greece, nor in Russia, nor in Europe,” Mr. Putin told a news conference after talks with George Papandreou. “It came to us from across the ocean,” he said in a clear reference to the United States. “There (in the U.S.) we can see similar problems - massive external debt, budget deficit,” Mr. Putin added, suggesting Russia and Greece should concentrate on the “real economy” to weather the economic crisis. Mr. Papandreou arrived in Moscow amid rumours that the cash-strapped euro zone member may turn to Moscow, still running the...

First, let me correct a mistake I made in my previous post on the Greek fiscal crisis and neoliberal oligarchy . My stepfather wrote me from Brussels where he heard straight from the Greek finance minister that military spending accounts for roughly 4% of GDP, not 15% as was originally written in my previous post. I verified this statement and it is correct: Greece directs approximately 4.3% of its GDP to military expenditures . I apologize for this mistake. Greece continues to be the hot topic in financial circles. In his Contrarian Chronicles, Bill Fleckenstein asks A big, fat Greek bailout? , and concludes: As an aside, I think Greece itself is probably less of a problem than California and some other U.S. states might be -- though for the moment, the fact that we as a country have a printing press and no rules governing its use is carrying the day. Perversely, when you've got a printing press running full throttle (as do the U.S., the United Kingdom and Japan), you can be as ...

A couple of items for you to consider this Sunday. First, BNN spoke to Kenneth Matziorinis (click on hyperlink to watch interview), president of Hellas Capita l. Ken is a Montreal based economic consultant who runs Canbek Economics . He recently wrote this comment on the Greek fiscal crisis which I share with my readers: Greece has one of the highest debt-GDP ratios in the Eurozone (113%), one of the highest budget deficits (12.7% of GDP) and one of the highest foreign debt ratios of all the countries in the zone (gross debt of 150% of GDP). When the newly elected government of George Papandreou was elected last Fall, they shocked markets by reporting that the previous government of Constantine Karamanlis had left them with a much larger budget deficit that had previously been reported, so it obviously spooked markets and forced the question, is Greece solvent and will it meet its payments on its Euro 300 billion (CAD 450) public sector debt. Bond markets reacted immediately to the ne...

As the world's spotlight turns to the Vancouver Olympics , all eyes will be on Canada. Our nation suffered comparatively less than other G7 economies during the last recession, and our banking system has received praises for being good and boring (read the Sceptical Market Observer's comment on this ). To be sure, our economy is adding jobs, our stock market has rallied sharply, our currency is close to reaching parity with the USD, commodity exports are up, everything looks great. A buddy of mine even told me that our currency is being bought by central banks around the world. Canada seems to be on a tear. But things are far from perfect. For one, there is a housing bubble in the making that could last a lot longer than people think. Stephen Jarislowsky, one of Canada's best known investors, says he believes government measures aimed at juicing the housing market has put the sector in a bubble : "I am convinced there is a housing bubble in Canada," Mr. Jaris...

Boyd Erman reports that the CPP Fund posts 1.8 per cent return : T he Canada Pension Plan Fund posted a 1.8-per-cent return in the final three months of 2009, thanks mostly to rising stocks. The gain boosted the fund's total assets to $123.9-billion, continuing its comeback from its recent low-water mark of $105.5-billion on March 31. Still, the rebound was at a much slower pace than in the preceding two quarters as equity market gains slowed and other assets, such as Canadian bonds, posted negative returns. The CPP Investment Board generated $2.2-billion in investment income in the quarter, the board said in a release. The quarterly performance brings the fund's rate of return for the first nine months of its fiscal year to 14 per cent, which translates to $15.2-billion in investment income over that period. The quarter posted “hardly the buoyant double-digit market returns we had seen in the previous two quarters but nicely positive over all,” said David Denison, CPPIB...