Thanks to Bernanke's efforts to push down interest rates by flooding the world with dollars, companies have gotten the not-so-brilliant idea to borrow money to fund their pension plans, hoping returns will exceed their borrowing costs.
Please consider UPS Fights ‘Fire With Fire’ to Fill Pension Gap
Companies facing the biggest pension deficit since at least 1994 are selling bonds at the fastest pace in more than seven years to plug the hole, betting that future returns will exceed their borrowing costs.
United Parcel Service Inc., the world’s largest package- delivery business, Dow Chemical Co., Northrop Grumman Corp. and PPG Industries Inc. sold at least $5.25 billion of investment- grade U.S. corporate bonds in November to fund their pensions, making it the busiest month since June 2003, according to data compiled by Bloomberg.
The Federal Reserve’s effort to hold down interest rates to stimulate the economy has caused corporate pension obligations, which are pegged to bond yields, to rise by $105.8 billion this year to $1.44 trillion as of October, according to Milliman Inc. Now, companies are taking advantage of borrowing costs at about the lowest on record as Goldman Sachs Group Inc. says interest rates will rise as the global economy recovers.
“They’re fighting fire with fire,” John Lonski, chief economist at Moody’s Capital Markets Group in New York, said in a telephone interview. “They’re being victimized by low bond yields, so why not go ahead and use them as an offset?”
Few, if any, borrowers have had their credit ratings cut for issuing debt to fund pension obligations, Lonski said.
Yields may not move substantially higher over the next several years, he said. “They’re willing to make a gamble that future returns will exceed the current cost of debt,” he said.
“If you truly believe that rates are going up, you should be issuing debt,” said Gordon Latter, a managing director at RBC Global Asset Management in Minneapolis. Latter said his firm is proposing that clients issue bonds to help fill pension deficits.
Poor AdviceYou do not borrow money to invest just because rates are going up. There's a set of not so insignificant factors including expected rate of return as well as risk management that
should come into play.
After this massive rally in equities, commodities, and bonds, cheerleaders think speculating in the markets is a good idea. It
could work out, but it's extremely foolish.
Equity prices in the US are priced for perfection if not far beyond perfection, China is tightening, a slowdown in Europe is inevitable, and commodities have been on fire but will likely come under stress because of China and Europe.
Moreover, state cutbacks are coming, and as many as 2 million people will lose all source of income unless Congress approved a benefits extension in the lame-duck session.
I can hardly conceive of a worse backdrop in which to go into debt for the sole purpose of betting on the market, yet that is the advice given. Just what are those companies supposed to do with the cash they raise from bond sales?
I suspect nearly all of it will go into long-this-long-that strategies. If correct, I smell a disaster for the borrowers.
But hey, Wall Street will win twice, first on underwriting the bond deals, then on fees to manage the investments. It's a sweeeet deal, for someone, namely those handing out poor advice.
Video Reveals Gimmicks Used by CalPERS to Hide The Decline in AssetsInquiring minds are reading California State Pension System Makes Madoff Proud by Gwilym McGrew
Much has been written about The California Public Employees’ Retirement System (CalPERS) being underfunded by $500 billion due to massive investment losses over the last decade, but now we have video of a CalPERS Senior Pension Actuary, Kung-pei Hwang, describing how they intend to change basic assumptions in their financial model to (please allow me to mix my metaphors) Hide The Decline in their assets held for municipal, county, and state employee’s retirement.
Through this statistical gimmickry, CalPERS can push the loss into later years and appear solvent today. Of course, at some point in the future it will need to raise funds from state and local governments to compensate for these losses. But for now, they seem content to hide the disastrous condition of their fund.
As you can hear Mr. Hwang say in his presentation to the Huntington Park City Council last week, “that means we will defer most of the loss to future years.” “This means the city will realize another increase in future years. I hate to bring bad news, but those are the facts.” Well, the fact is this bad news will hit budgets for all cities, counties and the state of California and not just Huntington Park. By playing with its financial model in this way, CalPERS is treating all California taxpayers like Madoff investors by cooking its actuarial books to Hide The Decline in its assets.
The video in the above link is somewhat hard to understand. However, Gwilym McGrew details exactly what CalPERS is attempting to get away with via various "smoothing" and "re-smoothing" extend-and-pretend operations that are doomed to fail.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post ListEmbracing New Opportunities Is Being Defeatist?
from the please-explain dept
A few months back a columnist for the Guardian, Helienne Lindvall wrote a laughably confused argument claiming that people who explained how "free" was an important element of a business model should not be trusted because they also made money. That made no sense, and lots of people explained why. She also got an awful lot of the basic facts wrong.
Lindvall is back, and rather than admitting her mistakes, she tries again, but comes across as even more confused and factually-challenged. The majority of the piece is about setting up more strawmen to knock over, with the two key ones being (1) that supporters of embracing new business models are "defeatist" because they suggest that file sharing cannot be stopped and (2) that while record labels may have ripped off musicians in the past, the companies ripping off musicians today are the "web 2.0" companies that are making money on content -- such as Google, Flickr and others.
Neither argument makes much sense when held up to any scrutiny. Lindvall seems to make the same mistake she made in her first piece (for which, I do not believe she has yet apologized). She takes a tiny part of an argument that someone has made, and pretends it's the entire argument. Just like she claimed that those who embrace free as a part of their business model are somehow being hypocritical in making money elsewhere, she now claims that people's entire argument is based on a tiny sliver of their argument, and ignores the important part.
The problem with her first strawman is that people aren't saying be "defeatist," and just accept that file sharing is file sharing and give up. They're saying that if file sharing isn't going away, and (here's the part she misses) you can use that to your advantage to make more money, why bother worrying about file sharing as being some sort of evil? The second strawman is a bit more nefarious, but goes back to the fallacy that web 2.0 sites are some sort of digital sharecropping, with the users "giving up everything," and the content creators getting nothing. That, of course, is hogwash. The reason people use these services is that they get something in return. What people like Lindvall forget or ignore is that in the days before YouTube, if you wanted to post your own video, you had to (a) buy expensive media serving software from the likes of Real Networks (b) install the crappy software and maintain it (c) host the files yourself, costing you server space (d) stream or download the files yourself, costing bandwidth. Then YouTube came along and made all of that both easy and free -- and you still want to complain that they're ripping you off? Seriously?
Fine: let's make a deal. For any project that Helienne Lindvall is involved in, she cannot make use of these tools which offer free services. Instead, she must set up the technology on her own server, and host and pay for all of it herself. Otherwise, she's just supporting the digital sharecroppers, right?
There are a few other whoppers in the article as well, such as this one:
Doctorow pointed out that numerous authors give away their work, while earning good money on the lecture circuit. I don't doubt that this model works for some authors, but there are fundamental differences between books and music.
Producing a record -- as opposed to writing most books -- tends to be a team effort involving a producer (sometimes several of them) and songwriters who are not part of the act, studio engineers and a whole host of people who don't earn money from merchandise and touring -- people who no one would pay to make personal appearances.
I love the "but we're different!" argument, because it comes up in every industry. I was just in Hollywood, where I explained how musicians were actually making use of these models and someone got upset and said "but we're the movie industry, and we're different!" Earlier this year, I met with a publisher, who also was looking at these models, and again exclaimed that "but book publishing is different!" Everyone wants to believe they're different, but everyone faces the same basic economics. Also, I'd imagine that my friends in the publishing industry would be pretty upset with Lindvall's false claim that a book is not a team effort. You have publishers and editors and agents, all of whom often take on quite similar roles to producers and songwriters and engineers.
That said, the really ridiculous part of her complaint here is that the same people she complains don't earn money from merchandise or touring
also don't earn money from record sale royalties for the most part. There are some exceptions, but most of them are paid a flat-fee for their work, and that doesn't change either way under the new models, so her complaint here doesn't make sense. If a content creator can make money giving away some works for free, they can still afford to pay the fees for those who help out. The entire argument that an engineer "doesn't tour" is specious. The engineer doesn't make money from CD sales either.
Finally. Lindvall must be the first person to describe Jaron Lanier as an optimist, since he came out with his incredibly pessimistic book about how the internet was destroying everything good and holy in the world.
33 Comments | Leave a Comment..
free bench craft company rip offAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
sexual enhancerAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
advertising enlargement stretcherAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
do bench craft company rip off pills workAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
free advertising enlargement exercisesAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
bench craft company rip offThanks to Bernanke's efforts to push down interest rates by flooding the world with dollars, companies have gotten the not-so-brilliant idea to borrow money to fund their pension plans, hoping returns will exceed their borrowing costs.
Please consider UPS Fights ‘Fire With Fire’ to Fill Pension Gap
Companies facing the biggest pension deficit since at least 1994 are selling bonds at the fastest pace in more than seven years to plug the hole, betting that future returns will exceed their borrowing costs.
United Parcel Service Inc., the world’s largest package- delivery business, Dow Chemical Co., Northrop Grumman Corp. and PPG Industries Inc. sold at least $5.25 billion of investment- grade U.S. corporate bonds in November to fund their pensions, making it the busiest month since June 2003, according to data compiled by Bloomberg.
The Federal Reserve’s effort to hold down interest rates to stimulate the economy has caused corporate pension obligations, which are pegged to bond yields, to rise by $105.8 billion this year to $1.44 trillion as of October, according to Milliman Inc. Now, companies are taking advantage of borrowing costs at about the lowest on record as Goldman Sachs Group Inc. says interest rates will rise as the global economy recovers.
“They’re fighting fire with fire,” John Lonski, chief economist at Moody’s Capital Markets Group in New York, said in a telephone interview. “They’re being victimized by low bond yields, so why not go ahead and use them as an offset?”
Few, if any, borrowers have had their credit ratings cut for issuing debt to fund pension obligations, Lonski said.
Yields may not move substantially higher over the next several years, he said. “They’re willing to make a gamble that future returns will exceed the current cost of debt,” he said.
“If you truly believe that rates are going up, you should be issuing debt,” said Gordon Latter, a managing director at RBC Global Asset Management in Minneapolis. Latter said his firm is proposing that clients issue bonds to help fill pension deficits.
Poor AdviceYou do not borrow money to invest just because rates are going up. There's a set of not so insignificant factors including expected rate of return as well as risk management that
should come into play.
After this massive rally in equities, commodities, and bonds, cheerleaders think speculating in the markets is a good idea. It
could work out, but it's extremely foolish.
Equity prices in the US are priced for perfection if not far beyond perfection, China is tightening, a slowdown in Europe is inevitable, and commodities have been on fire but will likely come under stress because of China and Europe.
Moreover, state cutbacks are coming, and as many as 2 million people will lose all source of income unless Congress approved a benefits extension in the lame-duck session.
I can hardly conceive of a worse backdrop in which to go into debt for the sole purpose of betting on the market, yet that is the advice given. Just what are those companies supposed to do with the cash they raise from bond sales?
I suspect nearly all of it will go into long-this-long-that strategies. If correct, I smell a disaster for the borrowers.
But hey, Wall Street will win twice, first on underwriting the bond deals, then on fees to manage the investments. It's a sweeeet deal, for someone, namely those handing out poor advice.
Video Reveals Gimmicks Used by CalPERS to Hide The Decline in AssetsInquiring minds are reading California State Pension System Makes Madoff Proud by Gwilym McGrew
Much has been written about The California Public Employees’ Retirement System (CalPERS) being underfunded by $500 billion due to massive investment losses over the last decade, but now we have video of a CalPERS Senior Pension Actuary, Kung-pei Hwang, describing how they intend to change basic assumptions in their financial model to (please allow me to mix my metaphors) Hide The Decline in their assets held for municipal, county, and state employee’s retirement.
Through this statistical gimmickry, CalPERS can push the loss into later years and appear solvent today. Of course, at some point in the future it will need to raise funds from state and local governments to compensate for these losses. But for now, they seem content to hide the disastrous condition of their fund.
As you can hear Mr. Hwang say in his presentation to the Huntington Park City Council last week, “that means we will defer most of the loss to future years.” “This means the city will realize another increase in future years. I hate to bring bad news, but those are the facts.” Well, the fact is this bad news will hit budgets for all cities, counties and the state of California and not just Huntington Park. By playing with its financial model in this way, CalPERS is treating all California taxpayers like Madoff investors by cooking its actuarial books to Hide The Decline in its assets.
The video in the above link is somewhat hard to understand. However, Gwilym McGrew details exactly what CalPERS is attempting to get away with via various "smoothing" and "re-smoothing" extend-and-pretend operations that are doomed to fail.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post ListEmbracing New Opportunities Is Being Defeatist?
from the please-explain dept
A few months back a columnist for the Guardian, Helienne Lindvall wrote a laughably confused argument claiming that people who explained how "free" was an important element of a business model should not be trusted because they also made money. That made no sense, and lots of people explained why. She also got an awful lot of the basic facts wrong.
Lindvall is back, and rather than admitting her mistakes, she tries again, but comes across as even more confused and factually-challenged. The majority of the piece is about setting up more strawmen to knock over, with the two key ones being (1) that supporters of embracing new business models are "defeatist" because they suggest that file sharing cannot be stopped and (2) that while record labels may have ripped off musicians in the past, the companies ripping off musicians today are the "web 2.0" companies that are making money on content -- such as Google, Flickr and others.
Neither argument makes much sense when held up to any scrutiny. Lindvall seems to make the same mistake she made in her first piece (for which, I do not believe she has yet apologized). She takes a tiny part of an argument that someone has made, and pretends it's the entire argument. Just like she claimed that those who embrace free as a part of their business model are somehow being hypocritical in making money elsewhere, she now claims that people's entire argument is based on a tiny sliver of their argument, and ignores the important part.
The problem with her first strawman is that people aren't saying be "defeatist," and just accept that file sharing is file sharing and give up. They're saying that if file sharing isn't going away, and (here's the part she misses) you can use that to your advantage to make more money, why bother worrying about file sharing as being some sort of evil? The second strawman is a bit more nefarious, but goes back to the fallacy that web 2.0 sites are some sort of digital sharecropping, with the users "giving up everything," and the content creators getting nothing. That, of course, is hogwash. The reason people use these services is that they get something in return. What people like Lindvall forget or ignore is that in the days before YouTube, if you wanted to post your own video, you had to (a) buy expensive media serving software from the likes of Real Networks (b) install the crappy software and maintain it (c) host the files yourself, costing you server space (d) stream or download the files yourself, costing bandwidth. Then YouTube came along and made all of that both easy and free -- and you still want to complain that they're ripping you off? Seriously?
Fine: let's make a deal. For any project that Helienne Lindvall is involved in, she cannot make use of these tools which offer free services. Instead, she must set up the technology on her own server, and host and pay for all of it herself. Otherwise, she's just supporting the digital sharecroppers, right?
There are a few other whoppers in the article as well, such as this one:
Doctorow pointed out that numerous authors give away their work, while earning good money on the lecture circuit. I don't doubt that this model works for some authors, but there are fundamental differences between books and music.
Producing a record -- as opposed to writing most books -- tends to be a team effort involving a producer (sometimes several of them) and songwriters who are not part of the act, studio engineers and a whole host of people who don't earn money from merchandise and touring -- people who no one would pay to make personal appearances.
I love the "but we're different!" argument, because it comes up in every industry. I was just in Hollywood, where I explained how musicians were actually making use of these models and someone got upset and said "but we're the movie industry, and we're different!" Earlier this year, I met with a publisher, who also was looking at these models, and again exclaimed that "but book publishing is different!" Everyone wants to believe they're different, but everyone faces the same basic economics. Also, I'd imagine that my friends in the publishing industry would be pretty upset with Lindvall's false claim that a book is not a team effort. You have publishers and editors and agents, all of whom often take on quite similar roles to producers and songwriters and engineers.
That said, the really ridiculous part of her complaint here is that the same people she complains don't earn money from merchandise or touring
also don't earn money from record sale royalties for the most part. There are some exceptions, but most of them are paid a flat-fee for their work, and that doesn't change either way under the new models, so her complaint here doesn't make sense. If a content creator can make money giving away some works for free, they can still afford to pay the fees for those who help out. The entire argument that an engineer "doesn't tour" is specious. The engineer doesn't make money from CD sales either.
Finally. Lindvall must be the first person to describe Jaron Lanier as an optimist, since he came out with his incredibly pessimistic book about how the internet was destroying everything good and holy in the world.
33 Comments | Leave a Comment..
- h p -Ann Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
bench craft company rip off pills reviewsAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
bench craft company rip off adviceAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
view company's websiteAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
natural bench craft company rip off exercisesAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
bench craft company rip off magazineAnn Marlowe, not known for optimistic reporting and commentary on our efforts in Afghanistan, takes a different tone in her Weekly Standard piece entitled Good News, for a Change. BLUF: "… Zabul seems to be on an upward path. ...
Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
bench craft company rip off programThanks to Bernanke's efforts to push down interest rates by flooding the world with dollars, companies have gotten the not-so-brilliant idea to borrow money to fund their pension plans, hoping returns will exceed their borrowing costs.
Please consider UPS Fights ‘Fire With Fire’ to Fill Pension Gap
Companies facing the biggest pension deficit since at least 1994 are selling bonds at the fastest pace in more than seven years to plug the hole, betting that future returns will exceed their borrowing costs.
United Parcel Service Inc., the world’s largest package- delivery business, Dow Chemical Co., Northrop Grumman Corp. and PPG Industries Inc. sold at least $5.25 billion of investment- grade U.S. corporate bonds in November to fund their pensions, making it the busiest month since June 2003, according to data compiled by Bloomberg.
The Federal Reserve’s effort to hold down interest rates to stimulate the economy has caused corporate pension obligations, which are pegged to bond yields, to rise by $105.8 billion this year to $1.44 trillion as of October, according to Milliman Inc. Now, companies are taking advantage of borrowing costs at about the lowest on record as Goldman Sachs Group Inc. says interest rates will rise as the global economy recovers.
“They’re fighting fire with fire,” John Lonski, chief economist at Moody’s Capital Markets Group in New York, said in a telephone interview. “They’re being victimized by low bond yields, so why not go ahead and use them as an offset?”
Few, if any, borrowers have had their credit ratings cut for issuing debt to fund pension obligations, Lonski said.
Yields may not move substantially higher over the next several years, he said. “They’re willing to make a gamble that future returns will exceed the current cost of debt,” he said.
“If you truly believe that rates are going up, you should be issuing debt,” said Gordon Latter, a managing director at RBC Global Asset Management in Minneapolis. Latter said his firm is proposing that clients issue bonds to help fill pension deficits.
Poor AdviceYou do not borrow money to invest just because rates are going up. There's a set of not so insignificant factors including expected rate of return as well as risk management that
should come into play.
After this massive rally in equities, commodities, and bonds, cheerleaders think speculating in the markets is a good idea. It
could work out, but it's extremely foolish.
Equity prices in the US are priced for perfection if not far beyond perfection, China is tightening, a slowdown in Europe is inevitable, and commodities have been on fire but will likely come under stress because of China and Europe.
Moreover, state cutbacks are coming, and as many as 2 million people will lose all source of income unless Congress approved a benefits extension in the lame-duck session.
I can hardly conceive of a worse backdrop in which to go into debt for the sole purpose of betting on the market, yet that is the advice given. Just what are those companies supposed to do with the cash they raise from bond sales?
I suspect nearly all of it will go into long-this-long-that strategies. If correct, I smell a disaster for the borrowers.
But hey, Wall Street will win twice, first on underwriting the bond deals, then on fees to manage the investments. It's a sweeeet deal, for someone, namely those handing out poor advice.
Video Reveals Gimmicks Used by CalPERS to Hide The Decline in AssetsInquiring minds are reading California State Pension System Makes Madoff Proud by Gwilym McGrew
Much has been written about The California Public Employees’ Retirement System (CalPERS) being underfunded by $500 billion due to massive investment losses over the last decade, but now we have video of a CalPERS Senior Pension Actuary, Kung-pei Hwang, describing how they intend to change basic assumptions in their financial model to (please allow me to mix my metaphors) Hide The Decline in their assets held for municipal, county, and state employee’s retirement.
Through this statistical gimmickry, CalPERS can push the loss into later years and appear solvent today. Of course, at some point in the future it will need to raise funds from state and local governments to compensate for these losses. But for now, they seem content to hide the disastrous condition of their fund.
As you can hear Mr. Hwang say in his presentation to the Huntington Park City Council last week, “that means we will defer most of the loss to future years.” “This means the city will realize another increase in future years. I hate to bring bad news, but those are the facts.” Well, the fact is this bad news will hit budgets for all cities, counties and the state of California and not just Huntington Park. By playing with its financial model in this way, CalPERS is treating all California taxpayers like Madoff investors by cooking its actuarial books to Hide The Decline in its assets.
The video in the above link is somewhat hard to understand. However, Gwilym McGrew details exactly what CalPERS is attempting to get away with via various "smoothing" and "re-smoothing" extend-and-pretend operations that are doomed to fail.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post ListEmbracing New Opportunities Is Being Defeatist?
from the please-explain dept
A few months back a columnist for the Guardian, Helienne Lindvall wrote a laughably confused argument claiming that people who explained how "free" was an important element of a business model should not be trusted because they also made money. That made no sense, and lots of people explained why. She also got an awful lot of the basic facts wrong.
Lindvall is back, and rather than admitting her mistakes, she tries again, but comes across as even more confused and factually-challenged. The majority of the piece is about setting up more strawmen to knock over, with the two key ones being (1) that supporters of embracing new business models are "defeatist" because they suggest that file sharing cannot be stopped and (2) that while record labels may have ripped off musicians in the past, the companies ripping off musicians today are the "web 2.0" companies that are making money on content -- such as Google, Flickr and others.
Neither argument makes much sense when held up to any scrutiny. Lindvall seems to make the same mistake she made in her first piece (for which, I do not believe she has yet apologized). She takes a tiny part of an argument that someone has made, and pretends it's the entire argument. Just like she claimed that those who embrace free as a part of their business model are somehow being hypocritical in making money elsewhere, she now claims that people's entire argument is based on a tiny sliver of their argument, and ignores the important part.
The problem with her first strawman is that people aren't saying be "defeatist," and just accept that file sharing is file sharing and give up. They're saying that if file sharing isn't going away, and (here's the part she misses) you can use that to your advantage to make more money, why bother worrying about file sharing as being some sort of evil? The second strawman is a bit more nefarious, but goes back to the fallacy that web 2.0 sites are some sort of digital sharecropping, with the users "giving up everything," and the content creators getting nothing. That, of course, is hogwash. The reason people use these services is that they get something in return. What people like Lindvall forget or ignore is that in the days before YouTube, if you wanted to post your own video, you had to (a) buy expensive media serving software from the likes of Real Networks (b) install the crappy software and maintain it (c) host the files yourself, costing you server space (d) stream or download the files yourself, costing bandwidth. Then YouTube came along and made all of that both easy and free -- and you still want to complain that they're ripping you off? Seriously?
Fine: let's make a deal. For any project that Helienne Lindvall is involved in, she cannot make use of these tools which offer free services. Instead, she must set up the technology on her own server, and host and pay for all of it herself. Otherwise, she's just supporting the digital sharecroppers, right?
There are a few other whoppers in the article as well, such as this one:
Doctorow pointed out that numerous authors give away their work, while earning good money on the lecture circuit. I don't doubt that this model works for some authors, but there are fundamental differences between books and music.
Producing a record -- as opposed to writing most books -- tends to be a team effort involving a producer (sometimes several of them) and songwriters who are not part of the act, studio engineers and a whole host of people who don't earn money from merchandise and touring -- people who no one would pay to make personal appearances.
I love the "but we're different!" argument, because it comes up in every industry. I was just in Hollywood, where I explained how musicians were actually making use of these models and someone got upset and said "but we're the movie industry, and we're different!" Earlier this year, I met with a publisher, who also was looking at these models, and again exclaimed that "but book publishing is different!" Everyone wants to believe they're different, but everyone faces the same basic economics. Also, I'd imagine that my friends in the publishing industry would be pretty upset with Lindvall's false claim that a book is not a team effort. You have publishers and editors and agents, all of whom often take on quite similar roles to producers and songwriters and engineers.
That said, the really ridiculous part of her complaint here is that the same people she complains don't earn money from merchandise or touring
also don't earn money from record sale royalties for the most part. There are some exceptions, but most of them are paid a flat-fee for their work, and that doesn't change either way under the new models, so her complaint here doesn't make sense. If a content creator can make money giving away some works for free, they can still afford to pay the fees for those who help out. The entire argument that an engineer "doesn't tour" is specious. The engineer doesn't make money from CD sales either.
Finally. Lindvall must be the first person to describe Jaron Lanier as an optimist, since he came out with his incredibly pessimistic book about how the internet was destroying everything good and holy in the world.
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Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
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Lawyers for former Senate Candidate Robin Carnahan are arguing that the Fox News network is singling the Missouri Democrat out in its lawsuit alleging her campaign violated the network's copyrights.
From the slow dance Republicans and Democrats have been doing in Washington the last few weeks over tax cuts and jobless benefit extensions approved earlier.
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