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Archives for August 2016

Worthy Reads: The reach for yield may end in tears

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The unrelenting hunt for yield may end in tears, says James Grant - The MarketWatch In Reach for Yield, HP Learns to Print Money - WSJ Largest Oil Companies’ Debts Hit Record High - WSJ The Woman Who Revived Russia’s Markets - WSJ Why You May End Up Spending Way More in Retirement Than You Realize - Money … [Read more...]

How to Survive the Calm before the Storm

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Central banks are running this market. It’s not real. It feels like a ghost town. But what are investors to do? Well, you may be aware that pensions are writing puts on volatility. In other words they’re offering downside protection to investors. Nice business in calm markets, but if the markets do go down, pensions will be on the hook. It’s yet another short-sighted view on the part of the so called fiduciaries. Yes, markets are calm. But as we enter the heart of hurricane season New Englanders and those who live on the Eastern Seaboard know it’s better to be wary of the calm and to be ready … [Read more...]

Worthy Reads: Reaching for Yield – Pension Fund Edition

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In Scramble for Yield, Pension Funds Will Try Almost Anything - WSJ Fed Officials Brace for (Familiar) New Normal - WSJ At Kimberly-Clark, ‘Dead Wood’ Workers Have Nowhere to Hide - WSJ U.S. economy providing ammo for higher interest rates - MarketWatch PRECIOUS-Gold slides to two-week low on talk of U.S. rate hike - Reuters … [Read more...]

Pensions Should be Fearful

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This has a bad feel to me as Ben Eisen and Aaron Kuriloff report on pensions at the WSJ: Some pension funds are seeking to profit from others’ fear. Pension funds in Hawaii and South Carolina are plying an arcane options strategy called cash-secured put writing. In a typical trade, the investor sells a contract, known as a put, to someone who owns stocks and is willing to pay up for protection in case they decline. If, within a certain time, the shares fall below a given price, the investor buys the stocks at that price, or covers their lost value. The upside for the pension funds, … [Read more...]

Ready for the Cycle of Decay?

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In an extensive op-ed in Financial Times, Bill Gross details how today's low yields threaten to cause a cycle of stagnation and decay. Gross and I agree that the low yields will have a detrimental effect on pension funds (read here, here and here). Gross takes it a step further to the knock on effects of what poor pension fund performance will mean for corporate profitability and ultimately the economy. There are other obvious drawbacks to near-zero yields and interest rates. Historic business models with long-term liabilities — such as insurance companies and pension funds — are increasingly … [Read more...]

Worthy Reads: Oil over $50 at six-week high on talk of supply freeze

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Fed Minutes Suggest Rate Rise Possible as Soon as Next Month (WSJ) Ukraine’s President Warns Full-Scale Russian Invasion Possible (Bloomberg) Everybody Has a Plan for Fannie and Freddie But Nothing Gets Done (Bloomberg) Planet Fitness CEO says his two biggest competitors are Chili’s and Uno’s (MarketWatch) Oil over $50 at six-week high on talk of supply freeze (Reuters) … [Read more...]