Yet another pension fund corruption case has been brought against a portfolio manager, this time by U.S. Attorney Preet Bharara, against New York State Common Retirement Fund official Navnoor Kang. Kang allegedly steered business from the state's pension fund toward certain brokerages in return for drugs, strippers, cash and other gifts. If the accusations are true, it's just one more instance in a string of recent pension fund corruption cases. The Wall Street Journal reports: On Wednesday U.S. Attorney Preet Bharara announced the indictment of New York State Common Retirement Fund … [Read more...]
Have You Lost a Valuable Part of Your Life Savings?
It turns out that many Americans are missing out on parts of their retirement savings. With frequent job changes, and confusing enrollment practices, Americans are leaving 401(k) plans and other retirement vehicles that they might not even know exist behind them . Anne Tergesen writes at The Wall Street Journal: As Americans jump from job to job, they are leaving more 401(k)-style accounts and pension benefits with ex-employers. Some lose track of the money, forfeiting a piece of their retirement security. While no one keeps exact tabs on the number of lost retirement accounts, … [Read more...]
What Memories Will We Leave Behind in the Year 2016?
Every year brings a combination of creation and destruction. As the world looks forward to 2017, it's a good idea to take a look back at 2016 to see what has been left behind. Earlier in the year I wrote to you about the closing of the last Howard Johnson's in New England. I wrote: Investors are taking their eye off the ball. With all the hand wringing over what the Fed is—or isn’t—going to do with rates, there’s a much bigger problem lurking in most investors’ statements. It’s called survivorship bias. Most of the big movers never existed when I was a kid. Great ideas or concepts don’t last … [Read more...]
You Know How to Buy, but do You Know When to Sell?
Why are investors better at buying stocks than they are at selling? This question and more were on my mind while reading Michael Lewis’ new book The Undoing Project. At the heart of it, the book is a love story (platonic) between two men, Israeli psychologists Daniel Kahneman and Amos Tversky, and their incredible work on how the mind alters our perception of reality. I won’t tell you more than that. But if you’ve read Moneyball by Lewis, you know the mind can play tricks on you. Reality isn’t an obvious thing. This book, as a continuation of the thinking in Moneyball, is about why it plays … [Read more...]
Are Parents Sick and Tired of Living with their Kids?
New data from the Census Bureau shows that almost 40% of young Americans were living with their parents in 2015. That's the highest rate since 1940. I have regularly encouraged Millennials to buy a home if possible (read here, here and here). Chris Kirkham reports in The Wall Street Journal that with so many young Americans living in their family homes, there's much lower demand for housing than there would be typically. The trend runs counter to that of previous economic cycles, when after a recession-related spike, the number of younger Americans living with relatives declined as the … [Read more...]
Are Blind Trust and Greed the Two Worst Qualities in Investing?
On Monday I told you about a former public employee losing $25 million when he left to work at a hedge fund. Here is another completely separate case of a failure in trust. Both are examples of the blind trust and greed that are the undoing of so many investors. A businessman who is a focus of a federal corruption probe into the New York Police Department and Mayor Bill de Blasio’s fundraising helped arrange an investment of at least $10 million in a hedge-fund firm by the city’s correction officers’ union, people familiar with the matter said. Jona Rechnitz, a Brooklyn real-estate … [Read more...]
This Pension Still Blind to its Ways
The good news is that Rhode Island pensions are getting out of hedge funds. The bad is that some of the proceeds are going into private equity. “In some cases, you’ve just seen the emperor has no clothes,” Rhode Island General Treasurer Seth Magaziner said in an interview. Rhode Island in September decided to halve its hedge-fund investments, and it is redeeming from firms including Brevan Howard and Och-Ziff. It isn’t invested in York. The state plans to redeploy some of its hedge fund money into private equity. High fees helped drive the decision. Mr. Magaziner said more than half the … [Read more...]
They Trusted Him and He Lost $25 Million
Here's yet another example of a hedge fund losing money courtesy of the Boston Globe: When MBTA Retirement Fund board members met in March 2007 to consider sinking $25 million into a hedge fund, several of them weren’t convinced it was a smart move. They wondered whether the fund was too risky, too expensive, or even a good match for that slice of pension money, records recently obtained by the Globe show. But a month later, the board’s executive director at the time, Michael Mulhern, recommended that they commit to the investment. He cited the “level of trust’’ they all had in the man … [Read more...]
You Need to Know Why I Love Vanguard GNMA
Good morning from Newport, RI where at 5:22 am it’s 11 degrees outside, 1-3 inches of snow are expected, and with the wind it feels like -5. In Bartlett, NH my iPhone says it’s -6 outside with the wind blowing 29 mph making it feel like it's -34. It’s cold outside. But just like any other day, here I am writing to you. And that’s how I want you to think about your portfolio and one position in particular. If you own Vanguard GNMA you might be wondering if the winter vortex is upon you. You may be wondering if this is a time to sell, or, maybe this is a buying opportunity. I don’t want you … [Read more...]
New Rate Boost by Bumbling Fed Still Asleep at the Wheel
Are you shocked? You shouldn’t be. The Fed’s mini-quarter of a point increase in interest rates yesterday was long-overdue—we’ve been saying so for years (read here, here, here,and here)—and the three more increases expected for next year fall well short of our 4% target. Why? Because the 90-day Treasury needs to get to 4% and it needs to get there pronto, plain and simple. The North Star, as Dick Young refers to the T-Bill, which has been lost in the night sky for years now, is beginning to flicker (see the big jump in rates on the chart below). It’s been a long-cold winter. Retirees … [Read more...]
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