The RAGE Gauge for September continues to signal High Risk. The most significant contributor to this month’s reading was the all-time record of handgun background checks for the month of August at 611,575. Gold pulled back over the last 30-days, but is still holding strong at the $1,300/troy oz. support level while the yield on the 3-month T-Bill ticked higher. Both are an indication the market is taking Federal Reserve threats of rate increases more serious. I don’t expect the Fed to rock the boat much prior to the election. … [Read more...]
YETI Coolers: Invest in Your Life
We use our Yeti cooler for our summer boating trips. This article in the WSJ on how they’re being stolen reminded me of this cool video on their website. If you're interesting in boating, read my series, How to Buy a Boat (Parts I, II, III, IV, V, and VI). John Clarke writes in The Wall Street Journal: Yeti coolers have cult status among outdoors enthusiasts who swap stories and videos online about their Yetis. Some fans call the Yeti the “Redneck Rolex.” They are also big with burglars this year, who are swiping Yeti coolers from stores, cars, boats and beaches … [Read more...]
Millennium Tower Boston
Millennium Tower in Boston is a perfect example of what’s happening in Boston’s luxury condo market. From today’s Boston Globe: For proof that Boston has become a luxury housing mecca for wealthy people from around the world, look no farther than Downtown Crossing. At the high-end Millennium Tower, buyers have come from Greece, Hong Kong, and the Middle East, scooping up condos two or three apiece. There’s a real estate executive in San Francisco who markets luxury US properties in Asia, and claims on her website that she’s sold 7 percent of the tower — roughly 30 units. And then … [Read more...]
Bond and Pension Struggle in Puerto Rico
You get an idea how the struggle between bondholders and pensions quickly turns into a political nightmare, as reported in the WSJ: San Juan, Puerto Rico—One of the thorniest tasks awaiting a seven-member board charged by Washington with cleaning up Puerto Rico’s debt crisis is deciding how to balance a $70 billion debt load with nearly $43 billion in unfunded pension liabilities. The issue is coming to a head now because the White House is set to name as soon as next week the members of that oversight board, drawn from lists of candidates submitted by congressional leaders in both … [Read more...]
Pension Survival Increases Risks
"The public dispute over accounting standards is a signal to taxpayers, retirees and political reformers that fundamental flaws remain in how pensions measure their finances,” writes Steve Malanga in the WSJ. At issue, as he correctly points out, is the delusion that government pensions “on average estimate they will earn 7.6% a year on their portfolios.” Using a more realistic riskless rate (as if that exists!) increases the unfunded liability from about $1 trillion to $3 trillion. It’s all funny money. I’ve looked at the numbers in Newport, RI and it’s ugly. The stock market will not come to … [Read more...]
Low Interest Rates Threaten Insurers and Baby Boomers
Here you get a glimpse at the problems facing insurers and baby boomers thanks to the Fed’s zero percent interest rate policy as reported earlier this month in the WSJ. Insurers reported a messy second quarter plagued by low interest rates and catastrophe claims, highlighted by a $2 billion charge at MetLife Inc. tied to a savings product popular with baby boomers. Life insurers MetLife, Prudential Financial Inc. and Lincoln Financial Group booked lower premiums and fees, while property-and-casualty insurer Allstate Corp. faced elevated levels of claims for severe weather, including a … [Read more...]
Corporate Tax Rates around the World
I subscribe to the Tax Foundation's weekly email. I find their tax maps to be a go to resource for perspective and intelligence. … [Read more...]
How to Survive the Calm before the Storm
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...]
Pensions Should be Fearful
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?
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...]
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