Pension Pulse

Brooke masters of the FT reports that Pension fund sues Goldman board : A pension fund for fire and police officers has sued the board of Goldman Sachs, seeking to stop the investment bank from paying out billions of dollars in bonuses to the bank's staff, writes Brooke Masters in London . Lawyers representing the Security Police and Fire Professionals of America Retirement Fund argue that the board has "abdicated" its responsibility to shareholders and "blindly "rewarded" executives for "corporate performance that has absolutely nothing to do with the skill of the company's employees". The lawsuit, filed in New York late on Monday, claims that Goldman's 2009 profits are due to direct taxpayer help and $13bn used to bail out American International Group , a Goldman counter-party. Lawyers from the firm Grant & Eisenhofer wrote in the complaint that paying 50 per cent of net revenues to staff constitutes "waste" and "eleva...

Craig Karmin of the WSJ reports that Moody's Cuts Calpers' Rating (hat tip Tyler): Calpers may be paying a price for its decision to help financially strapped local California governments. Moody's Investors Service slashed the triple-A rating of Calpers, formally known as the California Public Employees' Retirement System, by three notches to Aa3. The downgrade, made Thursday, in part reflected Calpers' recent spike in unfunded liabilities, following the fund's negative 24% return for the year ended in June. Calpers, the nation's largest public fund with about $200 billion in assets, last month delayed its efforts to offset those liabilities by agreeing to defer an increase in local-government contributions to the fund from 2011 until 2012. Because Calpers doesn't have outstanding bonds, the downgrade's impact would be felt through Calpers credit enhancement program. The pension fund used its triple-A rating to guarantee the debt of various munic...

Michael Weinstein of the NYT reports that Paul A. Samuelson, Economist, Dies at 94 : Paul A. Samuelson, the first American Nobel laureate in economics and the foremost academic economist of the 20th century, died Sunday at his home in Belmont, Mass. He was 94. His death was announced by the Massachusetts Institute of Technology , which Mr. Samuelson helped build into one of the world’s great centers of graduate education in economics. In receiving the Nobel Prize in 1970, Mr. Samuelson was credited with transforming his discipline from one that ruminates about economic issues to one that solves problems, answering questions about cause and effect with mathematical rigor and clarity. When economists “sit down with a piece of paper to calculate or analyze something, you would have to say that no one was more important in providing the tools they use and the ideas that they employ than Paul Samuelson,” said Robert M. Solow, a fellow Nobel laureate and colleague.of Mr. Samuelson’s at M.I....

Martin Roberge, Portfolio Strategist & Quantitative Analyst at Dundee Capital Markets , sent me his latest comment, Fed's Bernanke Has Shown His Hand: No Rate Hikes! Should Equity Investors Celebrate? : On Monday, Chairman Ben Bernanke provided an economic update at the Economic Club of Washington. In our view, the key takeaway from his speech is the non-conventional tightening mechanisms the Fed intends to use when economic conditions warrant a tighter monetary stance. While such mechanisms imply a prolonged period of low interest rates, history shows that a trading-range environment for the stock market remains the most likely scenario next year. It may be just our imagination, but after reading Ben Bernanke’s speech a few times, it seems that the next US monetary tightening cycle will be initiated through Japanese-like monetary mechanisms as opposed to conventional rate hikes. Indeed, the Fed spent a great deal of time explaining how it can apply upward pressure on short-te...

Bill Tufts, publisher of the blog Fair Pensions for All, gave me a heads up that the World Bank released a report on Tuesday, Financial Crisis Hits Pension Systems in Europe and Central Asia : The financial crisis has significantly impacted pension systems in the countries of Europe and Central Asia (ECA)* and many of the governments have been tempted to make policy changes in response to the increased pension deficits, says ‘Pensions in Crisis,’ a World Bank Regional report released today. But despite the severity of the crisis, it pales in comparison to the demographic crisis which the region will face, and World Bank experts urge countries in the region not to make any policy changes focused on addressing short-term fiscal concerns that make the long-term even worse. The new report analyzes the impact of the financial crisis on pension systems of ECA countries, reviews the initial policy responses by individual governments, and provides recommendations on how to strengthen pensi...

Walden Siew of Reuters reports that pension funds seek alternatives in hunt for yield (hat tip Mike): Large public pension funds in New York, California and Ohio are looking increasingly to alternative investments in hedge funds, private equity and emerging markets in a global hunt for yield, senior managers and trustees said. The global credit crisis has put a squeeze on money managers who must try to boost returns by looking at nontraditional investments that are a growing allocation in some portfolios, in some cases making up more than a quarter or more of fund holdings. "We're going to act prudently and be hesitant to rapidly increase our assets to alternatives, but we're pretty much of the opinion that that's where you have to be," said Joe Alejandro, treasurer of the New York City Patrolmen Benevolent Association, during an Alternative Investment conference on Sunday. Recession has hit states including Ohio hard but alternative investments in area...

I recently read Graham Turner's book, No Way to Run an Economy: Why the System Failed and How to Put it Right . Quite honestly, it is the best book I've read in finance/ economics and politics in years and I highly recommend it to money managers, central bankers, policymakers, and anyone else who wants to understand the financial crisis and its repercussions for our future. Graham Turner is one of the best economists I ever met. His firm, GFC Economics , is based in London and it provides independent economic research - on US, UK, Japan, and Eurozone – to institutional clients on a subscription basis. If you're an institutional money manager or government agency, this one service worth spending on. There are others but they're way more expensive and do not offer the insight that Graham and his team offer. Ruth Sutherland, business editor of the Observer recently reviewed Graham's new book for the New Statesman : Democratic deficit The most astute commentat...

Dan Burrows of Daily Finance writes So much for the Dow's 2009 high. Good news on jobs is bad news for stocks : It was silly season on Wall Street Friday. November's unemployment figure -- still a dismal 10% and subject to revision -- came in stunningly better than expected and the markets immediately soared to fresh 2009 highs. The Dow Jones Industrial Average ( $INDU ) alone shot up as much as 150 points in early trading. And then, at about 11 a.m. Eastern, everybody decided to sell. "I don't know what happened," says David Wyss, chief economist at Standard & Poor's. "Some of it was probably just profit taking, but anybody who believes in rational markets hasn't looked at them very long." On a Teeter-Totter The Dow spiked, plunged and eventually finished with a wee gain. Welcome to the wacky world of equities, where good news is bad news and bad news is good news. It seems traders -- as fidgety as chipmunks but with shorter attention spans...