Leo Kolivakis's blog

My own views on fundamental indexing is that it has merits but it also has limitations.
Sure, AP2 will not suffer the same drawdowns as other pensions during bad years, but it will also not participate as much on the upside during good years.

So are problems with pensions only limited to the UK and Ireland? Of course not. There are governance issues plaguing private and public pension plans all around the world. Unless we get serious and address these issues, pension systems will remain vulnerable to flagrant abuses. Do we need a total collapse of pensions to rectify these issues?

I don't get too excited when I see one day sell-offs. I was talking to a trader who told me he thinks hedge funds are unwinding risk trades going into year-end. Maybe they are or maybe this is another classic shakedown of nervous investors before they bring this market much higher.

When it comes to the pension pie, the insurance industry wants a big piece of the action. Notice how the editorial sounds a lot like those fear-mongering campaigns from U.S. health insurance companies, warning us of the "dire fiscal consequences in the future". The only thing missing was "we don't want a public option for pensions".

As I stated before, there is an unprecedented amount of liquidity in the global financial system that can easily lead to another bubble sooner than you think. Is the market "going to the moon"? You can call me crazy, but my bet is still that the market is going to the sun and it will melt up faster than it takes Bill Gross to blow out his midnight candles.

The pension debate needs to reopened. It's not a Conservative, Liberal or New Democratic issue, it's about doing what's best for hard working Canadians. The reforms proposed today are simply not enough and will leave far too many Canadians teetering on the edge of pension poverty. Surely we can do better. We owe it to millions of Canadians that through no fault of their own, have fallen victim to vagaries of the market.

The rally in global stock markets has helped fuel the partial recovery in OECD pension assets but it will take years before these assets fully recover. Why? Because given the low bond yields throughout the developed world, it is unrealistic to expect stocks to continue rising at this blistering pace. Moreover, the fundamentals suggest the recovery will be more modest than what is currently priced in.

Mr. Soros is absolutely right, if they want to take risks, let them do it managing a hedge fund on their own, not within a bank. This way, they have skin in the game and their bets go wrong, they feel the pain.

The big question is how will other nations respond to the symbiotic relationship between the U.S. and China? This week we saw Asian currencies declining on intervention speculation. Will we see intervention in the currency markets? I am not sure, but the current path is unsustainable and will require some sort of intervention as it poses serious risks to the global recovery.

I agree with Barry Eichengreen, reports of the U.S. dollar's demise are greatly exaggerated. The mighty greenback will come roaring back, perhaps sooner than you think.

As you can see, there are many things going on in the world and I am just trying to connect all the dots as best as I possibly can, focusing on the major trends that will shape our future.

When I testified on Parliament Hill last April, I knew it be a matter of time before pensioners would be protesting their cuts in pensions and benefits. As much as the images of Nortel pensioners taking it to the Hill disturb me, they are nothing compared to the mass protests we'll see all around the world in the future when the pension crisis reaches a boiling point. Politicians should take this as a wake-up call and act in the best interests of all citizens.

As pension plans face mounting financial strains, they will be scrutinizing every relationship, including the ones with their big custodial banks. If there is any truth to these allegations, State Street will see many of their pension clients switching to another custodial bank.

I believe monetary authorities are desperately trying to reflate the real economy by flooding the financial system with a tsunami of liquidity. Asset bubbles are being formed as we speak. Equity and commodity prices will head much higher but it remains to be seen whether higher asset prices will translate into higher real prices. Stay tuned, but in the meantime you might want to curb your enthusiasm and remain very alert as asset prices disconnect from fundamentals.

The sad part in all of this is that pension contributions are funding this Casino Capitalism. Money is going to develop new ways to screw buyside clients that invest trillions in the markets. Pensioners don't stand a chance in a neo-Feudal world. I think it's time for a revolution, hopefully one without bloodshed, that will democratize the financial system by loosening the grip of the financial oligarchs.