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Florida Rolling the Dice with Pensions?

Leo Kolivakis's picture




 

Via Pension Pulse.

Kris
Hundley of the St-Petersburg Times reports, Florida
rolls the dice with chunk of pension funds
:

Chasing
bigger investment returns, the agency that manages Florida's $113.8
billion public pension fund wants to make far riskier investment bets.

 

The state wants to reduce the pension fund's
holdings in publicly traded stocks and bonds and triple its allocation
to hedge funds and other private investments that are less liquid and
harder to value.

 

Earlier this month, the head of the State Board
of Administration told his bosses that rearranging the state's
portfolio would benefit the nearly 1 million public employees and
retirees who depend on the fund, as well as the taxpayers who
underwrite the system.

"We will probably have a slightly higher
level of return, with a slightly lower level of risk," SBA executive
director and chief investment officer Ash Williams told Gov. Charlie
Crist, Chief Financial Officer Alex Sink and Attorney General Bill
McCollum.

 

All three voted to approve Williams' plan after a few
questions from McCollum and Sink and no comment from Crist. The
Legislature still must approve the expansion of the alternative asset
class.

 

Several financial experts said that expecting higher
returns with lower risk is as realistic as promising weight loss on an
all-you-can-eat diet.

 

"It's basic Finance 101: There's no such
thing as reducing risk and increasing return," said Lawrence Weinman, a
financial adviser in Los Angeles who teaches endowment investing.

 

Edward
Siedle, an attorney formerly with the Securities and Exchange
Commission, said Williams' assertion that he can make the SBA's pot of
money grow bigger, faster, with less risk is "the perfect political
response. But it's an absurd investment scenario."

Andrew Biggs,
former principal deputy commissioner of the Social Security
Administration and resident scholar at the American Enterprise
Institute, said it may be possible to produce higher returns in the
short term. But in the long term, the risks catch up with you.

 

"There
are lots of studies of what percent of active managers beat the market
and the answer is, in any given year, it's very low. Over the long
term, it's even lower," he said.

 

"People who are doing it may just be
lucky. It's like a monkey with a dartboard."

 

Biggs believes Florida's pension fund, which needs to earn 7.75
percent a year to meet its pension commitments, already has taken on
too much risk.

He asked: "Do Florida's
taxpayers really want the pension plan to be running a hedge fund on
their dime?"

 

• • •

 

After years of being in charge of the
SBA's stodgy fixed income assets division, veteran SBA money manager
Michael Lombardi was thrilled to be transferred to the pension fund's
new strategic investment asset class. In an e-mail May 19, 2008, he
shared the news with a contact at Lehman Brothers.

 

"Instead of
managing a portfolio with the highest quality and shortest maturity,
I'll be recommending limited partnerships to invest in unrated
securities and lock up our money for 5 to 10 years," he said. "Should be
way more interesting and a lot less compliance!"

 

Less
compliance, because unlike publicly traded stocks and bonds, hedge
funds are not registered or regulated by the SEC.

 

Now Lombardi's boss wants to move even more
money into these types of strategic assets, which include commodities,
timberland and hedge funds. In his presentation to the elected
officials who oversee the SBA, Williams downplayed concerns over hedge
funds.

 

"Hedge funds are an area I have a pretty significant
amount of experience in, and it's an area a lot of people express a lot
of anxiety about," said Williams, who handled investor relations for a
New York City hedge fund. "But this is not something that should cause
you to lie awake at night."

 

Williams told the trustees the SBA
would not invest in secretive, "black-box" hedge funds that refuse to
disclose their strategies, "because that's what leads you to people like
Bernie Madoff."

 

"We're talking about fundamentally-oriented
funds, with modest leverage to the extent they use leverage at all," he
told Crist, Sink and McCollum. "They'll have the appropriate
institutional-level transparency, institutional-quality investment teams
and institutional-quality investor bases."

 

Experts said
transparency in hedge funds is a laudable but unrealistic goal.

 

"There's
a limit to their transparency,'' Biggs said, ''because hedge funds
make above-market returns by exploiting inefficiencies in the market.
These profits go away if everyone knows what you're doing."

 

Leo
Kolivakis, a former senior investment analyst at two of Canada's
largest pension funds, said true transparency would mean that Florida's
pension fund would retain control of the account and be able to
withdraw its money at will.

 

"Some hedge funds want you to invest
for a three-year lock-up," he said. "But the pension plan should be
able to pull the plug."

 

Williams
dismissed this option, saying in e-mail, "I wouldn't want to invest
with a fund that would allow any investor to pull its assets from the
fund at will if the investment strategy is in fact one for which more
stable capital is appropriate, and other investors are subject to an
appropriate lock up."

 

Kolivakis, who
publishes Pensionpulse.blogspot.com, said Canadian pension funds are
moving away from hedge funds, even as they find favor with many public
pensions in the United States.

 

"Not all alternative investments
are bad, but it's all about finding the right manager," he said. "And
lots of pensions are chasing the same funds."

 

The transparency Williams said he would demand of hedge funds
has not been extended to the taxpaying public. The SBA's website
includes limited information on the number, nature or value of its
current alternative holdings. Nor does the agency make public how much
it pays in fees to these managers, who typically get 2 percent of the
state's investment plus 20 percent of any profits.

 

In response to
a public records request from the St. Petersburg Times, the SBA
disclosed that since the early 1990s, it has funneled nearly $12
billion into more than 130 privately held funds. The funds have spun
off about $8 billion in distributions and had a market value of $6
billion at the end of 2009.

 

The SBA said it's difficult to assign
an interim value to long-term alternative investments, which are not
easily converted to cash and often lose money in their early years.

 

"Due
to numerous factors, including the lack of standardized valuation and
reporting standards,'' the SBA said, "the return information . . . may
not reflect the expected returns of the partnerships."

 

Reviewing the SBA's data, Biggs, the
economist, calculated that the alternative asset portfolio's weighted
average return was less than one-half of 1 percent.

"Good Lord, that's a crappy return," he
said. "It doesn't mean you'll get lower returns in the future, but it's
not something that makes you say, 'This is how we'll rescue the
pension fund.' "

 

• • •

 

Along with reducing its allocation
to stocks and bonds, the SBA plans to reduce the number of outside
managers handling these assets. Williams said it could save the fund $2
billion in fees over 15 years.

 

"The economic stresses on our
member employers is going to be pretty significant," he said, referring
to the counties and school districts that contribute to the pension
fund.

 

"So $2 billion in savings looks significant."

 

Williams did not mention the flip side: the
increased fees the pension fund will pay hedge fund managers, who are
paid considerably more than traditional money managers.

 

Even
allowing for higher management fees, Williams said, hedge funds have
shown strong returns.

 

"Look at the misery of 2008," he told the
trustees. "The broad equity average was down north of 40 percent. At
hedge funds, the average across the industry was down about half that or
less.

 

"This is an asset area that a lot of people think of as
exotic or potentially risky. In reality it preserved capital better than
what are perceived as less risky areas."

 

A longer-term
perspective on hedge fund performance found the opposite.

 

Yale
finance professor Roger Ibbotson is chairman of Zebra Capital Management
in Connecticut. In March, he reported his analysis of the return on
investment from 8,400 hedge funds going back 15 years, from January 1995
through December 2009.

After accounting for the 60 percent of
funds that failed, Ibbotson found that the return on hedge funds was
lower than the return on the S&P 500.

 

Even Ennis Knupp, the
pension consultants who developed the SBA's reallocation strategy,
concluded that the new approach would do little to improve the chances
of getting the return the pension plan needs to be fully funded.

 

Biggs, the researcher who is studying the
growing funding gap in public pensions nationwide, said in today's
tight times, no state or municipality is willing to put more money into
its pension funds. So making up for shortfalls with riskier bets is
one of the limited options available.

 

"The plans are effectively
doubling down on their bets as the unfunded liability gets bigger," he
said. "That puts a lot of risk onto taxpayers who may or may not want
to take it. But if the investments don't pan out, they're on the hook."

There
are so many points to cover here. First, I am not against hedge funds
or other alternative investments, however, I don't think they're the
panacea that many claim. And in the hands of incompetent pension fund
managers chasing the latest 'hot" fund, these alternatives can come back
to haunt you for years.

Let's say you followed the pension herd
and invested billions in private equity at the top between 2005 and
2007, then you got creamed on those investments. Sure, if you hold these
investments long enough, you might realize some gains, but the
likelihood is that you will underperform the S&P500 over this
period. (See Private
Equity Returns: Myth and Reality
).

As for hedge funds, there
are some that focus on illiquid strategies, but be careful. They will
sing you a whole song & dance and how they "exploit market
inefficiencies", but the reality is they're locking up pension money,
collecting 2% management fee, and if a liquidity crisis hits them, their
portfolios will get whacked hard. Again, tread very carefully with
illiquid hedge fund strategies. Lots more hype than substance behind
these strategies.

In the environment we're in, which could last a
very long time, I prefer liquid hedge fund strategies (global macros,
CTAs, Long/Short Equity). I would be very selective with illiquid
strategies, committing only a fraction of my hedge fund portfolio in
these strategies. In fact, I would group illiquid hedge fund strategies
with my private equity portfolio, allocating no more than 5%-7% of my
total pension fund portfolio there.

Back to Florida's SBA. They're
doing exactly what every other large US public pension fund is doing,
allocating more into alternative investments to meet their required rate
of return with supposedly less risk. But
taking on illiquidity risk is a huge risk
, one that might end up
costing Florida taxpayers billions to make up the shortfall.
Let's call a spade a spade and stop using the same marketing pitch that
hedge fund and private equity managers use when fighting for a piece of
the pension pot.

 

 

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Tue, 06/22/2010 - 15:05 | 427387 Diogenes
Diogenes's picture

"The state wants to reduce the pension fund's holdings in publicly traded stocks and bonds and triple its allocation to hedge funds and other private investments that are less liquid and harder to value."

Hasn't the stock market gone straight up for the past year?

Tue, 06/22/2010 - 14:09 | 427192 SnarkAttack
SnarkAttack's picture

Someone just needs to point out that what they need is impossible.

Global & US REAL GDP Growth Rate: http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_kd_zg&tdim=tr...

You can't get 8%, it's impossible, the world doesn't grow fast enough.

Tue, 06/22/2010 - 16:04 | 427536 seventree
seventree's picture

Someone just needs to point out that what they need is impossible.

The problem in a nutshell. There are pension fund managers all over the US and Canada that are facing default. Every one absolutely needs to make that one big score, some absurdly lucrative payout that will save their ass before doomsday arrives. It is simply not going to happen

Tue, 06/22/2010 - 12:51 | 426956 DosZap
DosZap's picture

At this point does IT MATTER?

If you cannot fund the SOB now, something has to be done........

Bottom line, you want 20% of what you were guaranteed, or go for it, and take the chance to kick it to 50/75%?.

I know which I would prefer.

 

Tue, 06/22/2010 - 12:35 | 426916 FreddyInBangkok
FreddyInBangkok's picture

funny isn't it.. in the midsts of total ruin the immense body of bureaucrat skanks is focused on getting their 150k-300K p.a. till their dying breath & the multi level layers of moneylosing financial expert skumbags are thinking what? there are more bullets than assholes so what's the problem ...

Tue, 06/22/2010 - 11:31 | 426774 Rainman
Rainman's picture

Of all the screwball ideas, NY takes the cake. The electeds have allowed the state and municipalities to borrow $ 6 billion from the very pension fund they owe it to as a means to get current on their unfunded liabilities. Interest payments to begin in 2013.

Now that's really thinking outside the box.

This is the definition of sanity from the desperately insane .

Tue, 06/22/2010 - 09:37 | 426560 Panafrican Funk...
Panafrican Funktron Robot's picture

Leo, please explain to me why pensions are a better for the pensioners than vanilla fixed annuities from a risk-adjusted return (including administrative expenses) standpoint.

Tue, 06/22/2010 - 10:51 | 426699 Leo Kolivakis
Leo Kolivakis's picture

In essence, I believe well managed pensions are much better than fixed annuities because they can offer higher risk-adjusted yields over the long term investing in a diversified pool of assets. Unfortunately, badly managed pension funds typically underperform these vanilla fixed annuities.

Tue, 06/22/2010 - 22:02 | 428322 Mitchman
Mitchman's picture

Ergo, all public pension funds should be invested in fixed annuities.  Unless you van point to  one here in the US that has delivered what they promised.

Tue, 06/22/2010 - 09:21 | 426527 ZackAttack
ZackAttack's picture

Actually, I guess if my state - finances already destroyed for a generation, and  primarily dependent on tourism revenue from the coast - was about to become a Forbidden Zone due to the GoM oil blowout, no risk would seem insane at that point.

Tue, 06/22/2010 - 08:57 | 426490 BumpSkool
BumpSkool's picture

A Pension Fund trying to play Alpha??? Are you joking?? ... no wonder everyone is going to be broke! Oh, well done man... well done... (is it any wonder everyone in the bisness tried to get these guys as counter-parties??? - - a trade with a pension fund is like instant kachingo, because they are almost always wrong.)

Tue, 06/22/2010 - 09:09 | 426508 Snidley Whipsnae
Snidley Whipsnae's picture

+1  Not only are they wrong about playing alpha, they don't care if they are wrong. After all, it isn't their money, and they will definitely get campaign contributions from whoever they invest the retirement account money with. It will get whacked and no one will be responsible. We won't even here an 'oops, sorry' out of the azzhats.

The fuckers on both sides of the bet are crooks, plain and simple.

Tue, 06/22/2010 - 08:48 | 426485 Chemba
Chemba's picture

Why don't the State pension funds just buy State Lottery Powerball tickets?

Tue, 06/22/2010 - 08:11 | 426454 Thoreau
Thoreau's picture

Just get 'em one of them HFT machines. YEEEE-HAWWWWW!

Tue, 06/22/2010 - 11:20 | 426466 Leo Kolivakis
Leo Kolivakis's picture

One senior pension fund manager told me that HFT works well when the VIX is between 15-25 - a sort of sweet spot. Below 15, these HFT platforms need to take on excessive leverage to make money, and above 25, they usually get slaughtered. Bottom line: HFT is no panacea either.

Tue, 06/22/2010 - 08:03 | 426448 MarketFox
MarketFox's picture

Ok...let's make this simple....

Practically every state has elected local officials which have done nothing more than regurgitate tax money to obtain political offices.....

This has resulted in bloated payrolls both in number of employees and amounts paid...

But hey...if it's ok for the Fed side...it's ok for the state side....

All actuarial numbers have to be radically reduced....particularly since "The Japan Syndrome" has been elected.....meaning rates of return will move from the current higher actuarial numbers to virtually nil...and perhaps negative because of the required take down from lofty numbers....

 

And the fix will be elimination of workers....reduction of pay....increased ages for retirement....and smaller retirement amounts....

.....................

 

And future prospects will not change until the govt. gets it...meaning that the input costs to production are far too high.....particularly taxes...which all govts. are increasing ...making it worse.....legal largesse....tort reforms...financial rewards have to be cut down....however legal largesse is the oligarch's favorite secret weapon....a weapon the little guy will never have...and cannot fight...other than just leaving town....

Which perhaps is not a bad omen....let the oligarchs swim in it....that is if they do not leave themselves....

Tue, 06/22/2010 - 07:35 | 426429 ZackAttack
ZackAttack's picture

Florida can do WTF-ever they want, as long as they don't come crying to the rest of the nation about their investment shortfalls.

 

I ask again, for the umpteenth time... Why is a $113 billion fund not simply indexed? There's no picking of managers, no need for a massive staff, the computers run everything for about 5 bp a year. You're guaranteed never to underperform your benchmark.

Obviously, the answer must be nepotism and corruption.

Tue, 06/22/2010 - 07:55 | 426440 Leo Kolivakis
Leo Kolivakis's picture

The point is to hire competent staff who will add alpha over your benchmarks, either internally or using external managers. If done properly, portable alpha can add significant gains over a long period. You swap into a stock or bond index (beta), and fund managers who deliver real alpha, not leveraged beta. If you don't do this properly, and underestimate liquidity risk, you're going to get whacked hard.

Tue, 06/22/2010 - 12:06 | 426848 Muir
Muir's picture

_

 

Good article Leo.

 

_

Tue, 06/22/2010 - 09:02 | 426496 Snidley Whipsnae
Snidley Whipsnae's picture

" If you don't do this properly, and underestimate liquidity risk, you're going to get whacked hard."

Investment advice in Florida, and many other places, is hired based on the amount of kickback received or 'compaign contributions' received, not based on competency. Crooks employing crooks, iow. You can blow that alpha/beta bs out your azz...What counts in Florida is 'what are you gonna do for me if I hire you/put money in your fund.' Which is exactly why it will end badly as did the state fund debacle I linked to above.

See Birmingham Alabama Sewage debacle for a fine example.

Tue, 06/22/2010 - 12:04 | 426842 Leo Kolivakis
Leo Kolivakis's picture

"Crooks employing crooks, iow."

In my experience, wherever there is big money involved, there will be crooks. This is why all pension funds should undergo an annual fraud audit performed by independent certified fraud examiners (CFEs) who report to the state's or province's auditor general. These reports and performance audits, should be made publicly available so the public has full confidence that these pension funds are run properly.

Tue, 06/22/2010 - 21:23 | 428270 Nihilarian
Nihilarian's picture

Take a look at Morningstar rankings. They are based on performance, not alphal "Morningstar gave this manager a 5 star ranking, let's use them." Sits will with everyone, especially fraud examiners. If Morningstar says they're good, they must be good! This is the same nonsense spun by the rating agencies. Beta is not Alpha, but Beta is the only thing that is pushed. 

But even if Alpha was actively sought, I doubt that it could be found with any level of success.

Besides, pension funds PICK their assumptions (instead of adjusting their assumptions given market conditions)... What is it average, 8% annualized now-a-days? With absurd assumptions like that, of course those who are 'fidiciury responsible' will opt for the highest BETA strategy available.

Tue, 06/22/2010 - 09:00 | 426493 ZackAttack
ZackAttack's picture

Saying it point-blank, I believe history demonstrates that with $116 billion to manage, they have no chance at adding alpha.

Even if it was possible with a portfolio this large, I also have no reason to believe that Florida can, a priori, identify which managers will be capable of adding alpha in the future.

Too much of a chance to take with something too important; the only rational choice is to settle for being average.  

Tue, 06/22/2010 - 07:32 | 426426 hotkarlandthecl...
hotkarlandtheclevelandsteamers's picture

His it bit confirmed that Leo is Abby Cohen and Bob Dole's illegitame child.

Tue, 06/22/2010 - 07:06 | 426414 Snidley Whipsnae
Snidley Whipsnae's picture

As you can see from this Bloomberg article the same actors are involved now that caused the SIV losses in the Florida State pool in 2007...In fact, the same people/crooks are overseeing the state pool and the pension pool...These azzhats should be in jail already but instead are now going to rob the state pension fund.

"The very fact that you're out here talking to us about taking less than 100 percent is in my mind unacceptable,'' said MaryEllen Elia, superintendent of Hillsborough County Public Schools. The county has $573 million frozen in the pool, more than any other school district. ``You need to figure out how to make the taxpayers in Florida whole.''

The Florida board's trustees, Governor Charlie Crist, state Chief Financial Officer Alex Sink and Attorney General Bill McCollum, will meet Dec. 4 to consider the crisis.

State Board Administration officials were to select an independent investment adviser today to work over the weekend analyzing the pool's situation, said Tara Klimek, a spokeswoman for Sink."

...and...

"The State Board manages the fund along with other short- term investments and the state's $137 billion pension fund.

The panel is considering ways to shore up the fund, including obtaining credit protection for $1.5 billion of downgraded and defaulted holdings hurt by the subprime market collapse. In voting for the suspensions, officials sought to stem the flood of money leaving the pool and avoid losses on forced sales of assets.

The investment pool's debt holdings that were downgraded below its minimum standards have a face value amounting to about 10 percent of the pool. Officials disclosed the investments in a report delivered to Crist Nov. 14 following a month of inquiries by Bloomberg News.

``This situation points up the need for monies held in trust by local and state governments to be subject to searching due diligence and constant risk assessment,'' said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission."

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aHR5KklFq4X0

 

Tue, 06/22/2010 - 07:05 | 426413 BumpSkool
BumpSkool's picture

WTF???

Leo Kolivakis, a former senior investment analyst at two of Canada's largest pension funds, said true transparency would mean that Florida's pension fund would retain control of the account and be able to withdraw its money at will.

Him?? Wow - - no wonder he talks the market up ... he's trying to get his job back!!

Tue, 06/22/2010 - 07:17 | 426417 Snidley Whipsnae
Snidley Whipsnae's picture

Maybe Leo is pals with Harvey Pitt (former head of SEC), Governor Charlie Crist, Bill McCollum, Sink, et al...?

No way should these people be in charge of the Florida State Pension Fund. They should be on the end of a mop handle in the crossbar hotel!

I have lived in Florida since 79 and have never seen such a bunch of inept, crooked, azzhats running the state. Most pols in the state got their start in real estate and now that it has collapsed (along with tourisim) they can't line their pockets from zoning regs/changes so they go after the savings of state employees. Fuck them!

Disclosure: I am not a Florida State employee and never have been.

 

Tue, 06/22/2010 - 06:48 | 426407 Snidley Whipsnae
Snidley Whipsnae's picture

Florida already had a dose of bad medicine and now they are back for more. The following 2007 SIV losses have been hidden but Florida is still sitting on the worthless assets and counties were forced to eat a share of the losses in small doses. The crooks will not be satisfied until the system is stripped bare. Let's look back three years...

"Cities and school districts in a $27 billion Florida local- government investment pool withdrew almost half of their deposits last month after they learned the fund held downgraded and defaulted commercial paper sold by SIVs. Florida officials froze the pool Nov. 29 to prevent a further run on assets.

BlackRock Hired

Much of the debt held by the Florida local government fund is worth less than 100 cents on the dollar and the rest is so troubled that its value can't be determined, according Chris Stavrakos, co-managing head of cash management for BlackRock Inc., the New York-based company hired to turn around the fund.

``I don't think there are very many securities in this market we can liquidate at par,'' Stavrakos said in an interview yesterday."

http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a22h5SFL8vWU&refer=news

Tue, 06/22/2010 - 12:09 | 426851 Muir
Muir's picture

_

"Let's look back three years.

'Cities and school districts in a $27 billion Florida local- government investment pool withdrew almost half of their deposits last month after they learned the fund held downgraded and defaulted commercial paper sold by SIVs. Florida officials froze the pool Nov. 29 to prevent a further run on assets.'"

 

Ah, thank you, I had forgoten about that.

_

Tue, 06/22/2010 - 06:35 | 426398 exportbank
exportbank's picture

The only fix for pensions is to properly fund them in the first place. Chasing yield always has bad results especially when you're in that chase for decades. 

A buddy of mine is married to a just retired High School principal (small town) her pension is over 100K - the real bad news is that she's a fit & healthy 58-year old and will probably live another 25 years - so without inflation the pension payout to her will be over 2.5 million dollars and you have this type of payout to every public servant (+- depending on wage but 50K as average) - Checkmate..   also - her total pension payout will be for more money than she earned in her entire career. Game Over..

Tue, 06/22/2010 - 06:25 | 426395 Ned Zeppelin
Ned Zeppelin's picture

In a related note, CALPERS officials announced the entire pension fund would be invested in the newly formed Kolivakis Chinese Energy Sector Fund.

Kidding aside, you'll see this as a trend everywhere. The consequences of chronic undefunding, unrecouped losses from the Great Recession and an inability to up the future recipients'contributions or the taxes of the proles will drive the pension managers into the arms of those who whisper magic words and promise the moon.

Tue, 06/22/2010 - 14:01 | 427168 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

I have to ask: what is the source of the underfunding? Is it because the employees don't chip in enough? Do they feel they don't need to do any more to keep getting a huge amount back? Or is the employer side trying to dodge regular contributions and simply hope for big rewards to catch it up?

Going double up and throw up is not a good idea for the desperate gambler.

Tue, 06/22/2010 - 03:52 | 426354 Tic tock
Tic tock's picture

I dunno, it looks like the dynamics may have turned into currencies becoming absolutely non-performing over the short-term, that whole Gold is the currency of first choice argument.. that could really be front and center. If I were in charge of Pensions treasury, I'd go for Silver and selected Intellectual property.

Tue, 06/22/2010 - 05:25 | 426374 Dr. Sandi
Dr. Sandi's picture

I'm investing in Chinese Music Royalties. It's gonna be BIG!

(Once they've worked out some minor copyright issues, of course.)

 

Tue, 06/22/2010 - 03:18 | 426346 StychoKiller
StychoKiller's picture

Aaugghh!  The Stupid, it burns!

Why not just plant the currency in the ground and call it "Seed Money?"

Tue, 06/22/2010 - 03:02 | 426340 Privatus
Privatus's picture

Absent state coercion, wealth seldom exceeds wisdom. And the State of Florida is a babe about to enter the woods.

Tue, 06/22/2010 - 01:59 | 426316 lawrence1
lawrence1's picture

Do a favor to friends and family members and encourage them to take as much of their money out of ALL pension funds, 401k, all retirement funds as soon as possible. These managers are all part of the collapsing system and as ignorant and tainted as Leo, still buying the dips, hoping and praying that all will be well when the overwhelming evidence is to the contrary.

Tue, 06/22/2010 - 11:46 | 426804 anarchitect
anarchitect's picture

+1000. One of the best things that happened to me was to get laid off by a long-time employer back in 2002, allowing me to move my 401(k) and pension plans into self-directed retirement accounts that could be invested in things like the precious metals sector rather than a bunch of lookalike equity mutual funds or lame income streams all run by useless bozos with a herd mentality.

Tue, 06/22/2010 - 12:59 | 426985 jeff montanye
jeff montanye's picture

devil's advocate:  wouldn't using hedge funds more get the pension fund greater exposure to precious metals/shorting "opportunities" than would be available through traditional "long only" generic stock and bond funds?  particularly helpful in times such as this deflationary depression.

Tue, 06/22/2010 - 13:53 | 427136 Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Flip side of devil's advocacy: what are the chances that FL will actually go into PMs or shorting something appropriate? These idiots will likely listen to the Mad hedge fund trader and go long BP and write CDS coverage for criminal companies.

Tue, 06/22/2010 - 01:56 | 426312 Tigers Wood
Tigers Wood's picture

Every teacher needs at least $150K for retirement! Less means sacrifice and would be unfair!! State workers must Unite!!

Tue, 06/22/2010 - 01:45 | 426299 septicshock
septicshock's picture

iwow, i wonder how much of a kickback those who voted for it got?  Fucking crooks... 

Tue, 06/22/2010 - 01:44 | 426297 Dr. Sandi
Dr. Sandi's picture

This smells like a traditional insider cluster fuck.

Okay, so maybe the Florida pensioners and ultimately the taxpayers get screwed even worse, but at least friends of friends get to scratch each others' scrotums.

But of course, nobody goes to jail or anything over this kind of swindle.

Yeah, I'm a cynic. And you can mark me down for not buying this line of bullshit for even a fraction of a second. They're moving to new banksters because the old ones weren't part of the club.

Just that simple.

 

 

Tue, 06/22/2010 - 01:35 | 426288 Bear
Bear's picture

Leo ...

"allocating no more than 5%-7% of my total pension fund portfolio there"

I see that you are not advocating for ZeroHedge

Tue, 06/22/2010 - 01:10 | 426263 Bear
Bear's picture

Just like every gambler who falls behind ... you take bigger and bigger risks to get even. What gets me is why the State pays these guys? FED is no different; double down with a pair of nines in holdem ... will the bluff work?

Tue, 06/22/2010 - 10:06 | 426599 I need more asshats
I need more asshats's picture

Actually it's perceived to be less risky but also less liquid. We know that the market will be supported at all costs so I think that all funds will take on more risk via a lack of liquidity. I don't see this to be an issue.

If we look at the big picture, the states total asset base, the pension fund is a minuscule liability.

Tue, 06/22/2010 - 10:55 | 426694 jdrose1985
jdrose1985's picture

We know that the market will be supported at all costs so I think that all funds will take on more risk via a lack of liquidity. I don't see this to be an issue.

It's this sort of thinking that makes me want to kick a dog every time I hear it..I suggest you start preparing to get your asshats handed to you! Gonna be an ugly 2H.

Has anyone else noticed that the only returns being seeked out nowadays are speculative in nature? There are really no more spreads to arb. Yes we are all unbelievably fucked because inputs(oil) have been seriously mispriced. There is no way out except to begin preparing for conservation of severely constrained energy, right fucking now.

Tue, 06/22/2010 - 12:53 | 426964 jeff montanye
jeff montanye's picture

don't kick a dog; keep commenting.  i think you're right.

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