Pension Pulse

Noah Barkin of Reuters reports, Euro doomsayers adjust predictions after 2012 apocalypse averted : Back in May, as the euro zone veered deeper into crisis, Nobel Prize-winning economist Paul Krugman penned one of his gloomiest columns about the single currency, a piece in the New York Times entitled "Apocalypse Fairly Soon". "Suddenly, it has become easy to see how the euro -- that grand, flawed experiment in monetary union without political union -- could come apart at the seams," Krugman wrote. "We're not talking about a distant prospect, either. Things could fall apart with stunning speed, in a matter of months, not years." Krugman was far from being alone in predicting imminent doom for the euro in 2012. Billionaire investor George Soros told a conference in Italy in early June that Germany had a mere three-month window to avert European disaster. Then in July, Willem Buiter, chief economist at Citigroup and former Bank of England policy...

I recently saw a fascinating CNBC documentary, Billion$ Behind Bars : With more than 2.3 million people locked up, the U.S. has the highest incarceration rate in the world. One out of 100 American adults is behind bars — while a stunning one out of 32 is on probation, parole or in prison. This reliance on mass incarceration has created a thriving prison economy. The states and the federal government spend about $74 billion a year on corrections, and nearly 800,000 people work in the industry. From some of the poorest towns in America to some of the wealthiest investment firms on Wall Street, CNBC’s Scott Cohn travels the country to go inside the big and controversial business of prisons. We go inside private prisons and examine an Idaho facility nicknamed the “gladiator school” by inmates and former prison employees for its level of violence. We look at one of the fastest growing sectors of the industry, immigration detention, and tell the story of what happens when a hard hit...

Twas the day after Christmas when all through the world, investors awoke to news that China's economy continues to improve : China's stronger manufacturing and real estate sectors indicate a recovery, but there are some concerns on whether this is sustainable. China Beige Book, an independent data roundup by CBB International, notes that the fourth quarter once again raises hope of a recovering manufacturing sector in China with far fewer manufacturers reporting declining production volumes. "This is not surprising, but is a strong evidence of stabilization," the report said. China's economy is an important bellwether and its slowdown for most of this year was a cause of concern. Its recent recovery is being watched closely as market participants try to analyze how the new administration will navigate the country through the rebalancing of its economy. One cause of concern, the China Beige Book highlights, is the rise in inventory at manufacturing and m...

The December letter from Absolute Return Partners is another must read for institutional and retail investors. The letter, In Search of the Holy Grail , delves into the frustrating practice of predicting financial markets: “It’s one thing to have an opinion on the macro, but something very different to act as if it’s correct.”    --Howard Marks, Oaktree Capital Management It can be a frustrating, and rather futile, experience to be an economist. Financial markets do not always behave as if there is a connection between economic fundamentals and stock prices, a subject I touched on in the October 2012 letter . In fact, if you believe the findings of a recent Vanguard study , rainfall statistics provide more value than either trend GDP growth or trend earnings growth in terms of their ability to predict future stock market returns (chart 1 below, click on image). Using U.S. market data going back to 1926, Vanguard analysed the predictive powers of a whole ...

Ian Marlow of the Globe and Mail reports, National Bank, which ignited RIM's rally last month, now downgrades stock : Shares of Research In Motion Ltd., which have soared over the past two months on a burst of positive sentiment, fell sharply Friday as investors digested a fresh reason to worry about the smartphone maker. After gaining momentum with the unveiling of its new BlackBerry 10 device, RIM released earnings on Thursday that contained worrying new details about the company’s service revenue – a key source of much-needed income. On a conference call with analysts Thursday, RIM management seemed unable to reassure investors worried about declines in RIM’s service revenues. That, combined with bearish analyst notes Friday, send the shares down about 22 per cent in Toronto. RIM, which has struggled against Apple Inc. and Samsung Electronics Co. Ltd., hauls in roughly one-third of its revenues from wireless operators for BlackBerry access to RIM’s proprietary, secure...

Ryan Vlastelica of Reuters reports, Stock futures imply slump, fiscal deal unlikely before year-end : Stock futures dropped more than 1 percent on Friday after a Republican proposal for averting the "fiscal cliff" failed to pass, dissipating hopes that a deal would be reached soon in Washington. Trading is expected to be volatile as investors view a fiscal agreement between the White House and Republicans before the year-end as increasingly unlikely. With trading thin ahead of the holidays, market swings will probably be amplified. CBOE VIX front-month futures, a measure of volatility, rose 5.7 percent. Late on Thursday, Republican House Speaker John Boehner conceded there were insufficient votes from his party to pass a tax bill, dubbed "Plan B," to help avert the cliff, tax hikes and spending cuts due to start in January that could tip the economy into recession. Boehner said he would hold a press conference at 10:00 a.m. ET (1500 GMT), during which he ...

Kathryn May of the Ottawa Citizen reports, Public service unions not entitled to pension surplus: Supreme Court : The Supreme Court of Canada has ruled federal employees aren’t entitled to any of the $28-billion surplus the government took from their pension funds a decade ago to help pay down the deficit because the accounts were nothing more than “ledger” records with no real assets. Wednesday’s unanimous decision, written by Justice Marshall Rothstein, rejected union and pensioners’ claims that the government breached its fiduciary duty when it scooped the surplus from the pension plans of Canada’s public servants, military and RCMP. They wanted the court to return the money to the plans. The high court upheld previous lower court rulings and found the pension accounts were not separate funds with assets but “rather accounting ledgers used to track pension payments” and to estimate the government’s future pension obligations in its financial statements or the Public Account...

Daniel Gross of the Daily Best reports, Cerberus to Sell Stake in Gunmaker Freedom Group : It took a while, but the owner of Freedom Group, the weapons conglomerate that makes the Bushmaster weapon used in last Friday’s assault in Newtown, Connecticut, finally said something. At 1 a.m. on Tuesday morning, more than 80 hours after the event, Cerberus Capital, the high-profile private-equity firm that owns Freedom Group, issued a statement. Cerberus expressed sadness and attempted to distance itself from the assault, noting that Freedom Group “does not sell weapons or ammunition directly to consumers, through gun shows or otherwise.” It continued: “We do not believe that Freedom Group or any single company or individual can prevent senseless violence or the illegal use or procurement of firearms and ammunition.” But you don’t need a weatherman to know which way the wind blows. Cerberus recognizes that the Sandy Hook even was a “watershed event that has raised the national debate...