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This Pension Fund Is Daytrading Your Retirement Funds, With Up To 500% Leverage
While we have already noted the backlash against hedge funds as a result of their chronic underperformance of the market over the past 5 years, resulting in first Calpers and now Texas Pensions to pull money out of the asset class, the reality is that in a micro-managed world in which the Fed itself is the Chief Risk Officer of the S&P 500, there is no need to actively manage assets - after all the money printer itself is doing so on behalf of everyone. However, it is not just highly paid hedge funds - paid highly to hedge risk which simply does not exist until such time as central banks lose control - but pension, mutual and virtually every other class of actively managed money will underperform the S&P as long as the central banks are actively pushing asset values higher (and when they stop watch out below because no amount of shorts or puts will offset the carnage that will result).
And yet some, such as Pension funds, have a specific bogey they have to hit every single year, in order to maintain a mandated increase in their assets or else suffer the wrath of disgruntled pensioners and overseers.
Which probably explains why as Pension360 reports, the Chief Investment Officer of one such pension fund decided to do the unthinkable: daytrade, i.e. gamble, its assets, which happen to be the lifetime savings of hard workers who just happen to be naive enough to believe their retirement money is entrusted into safe hands. Little did they know that instead they have handed the fruit of their lives' labor over to the E-trade baby.
And if that was not bad enough, the CIO intends to use as much as 500% leverage. While daytrading.
Here is Pension360.org's account
There are few, if any, pension board meetings as drama-filled as the ones that have taken place this month at the San Diego County Employees Retirement Association (SDCERA).
The fund’s trustees have been debating a strategy allowing extensive use of leverage in the fund’s investments. Such a strategy was proposed to increase the fund’s below-average investment returns. But if it backfires, it could evaporate the fund’s assets.
The man behind the plan is outsourced chief investment officer Lee Partridge, to whom the fund has given near total control over investment decisions.
Partridge has the authority to leverage certain investments up to 500 percent – without the permission of the fund CEO or anyone else.
Now, some board members are asking whether Partridge is participating in day trading with pension assets. The exchange, as reported by the San Diego Union-Tribune:
At the Sept. 4 board meeting, new board member Samantha Begovich asked Partridge if he was day-trading, the speculative investment practice that can result in heavy profits or losses by the hour.
“Tell me how it is prudent to take our $10 billion and risk it to $20 billion,” she asked, using dollar bills to illustrate her point about the potential to lose the entire fund and billions more. “We as trustees have to comply with a prudent investor standard.”
Partridge’s response:
Partridge said he invests and trades on a daily basis, but said it is done to balance risk, not to seize on minute-by-minute market changes. The strategy is extremely unlikely to drain the county portfolio, he said.
“We’re not trying to time the market,” said Partridge, whose one-man consultancy merged with Salient Partners in 2010. “We’re trying to maintain the intended level of exposure at all times so we’re not running too hot or too cold.”
More on the authority given to Partridge to leverage investments, From the San Diego U-T:
Under authority already granted to Partridge, the consultant can risk five times the value of “risk-parity” assets — capped at 20 percent of the portfolio — without notifying pension system CEO Brian White.
White also recommends Partridge be given leeway to invest 5 percent of the fund in “managed futures” that could be leveraged fourfold without independent approval.
There is also a real-estate component that Partridge can leverage to 200 percent without advance permission.
Because the investments are secured by the overall portfolio, a worst-case scenario could see the fund evaporate and leave the county owing billions more.
The board is also debating whether to retain Partridge’s services. The CEO of the fund, Brian White, has recommended a contract extension through 2021. The board also gave Partridge a 25 percent raise back in June.
SDCERA returned 13.4 percent in the fiscal year 2013-14, according to its annual report.
Meawhile, CalSTRS and CalPERS both returned over 18 percent.
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China Opens Gold Market to Foreigners Amid Price Ambition - Bloomberg
Ah ha ha ha - this is going to be a major disappointment for anybody desperately waiting for gold to take off. No, the Chinese are not going to 'save the gold market', they're going to fuck the retail dollar watching 'investor' harder than the bullion banks ever did.
It's amazing that uber dumbasses like Lee Partridge move from one fund to the next leaving a trail of gawdawful performance in their wake yet manage to pay off boards who in turn give higher and higher compensation.
Dress a retard in a suit and give 'em a fancy title and somehow the lack of mental faculties fades and the 'aww it's charming he's so stupid' comes forth..
Look at this moron's strategy:
http://www.bizjournals.com/houston/blog/money-makers/2013/06/salients-le...
Good at the scam though:
His advisory firm — Integrity Capital Services LLC — has no office and no staff, yet he managed to snag a contract for Integrity that will pay up to $3.21 million over three years. The gig: external chief investment officer of the $6.9 billion San Diego County Employees Retirement Association.
The board also adopted a complex new asset allocation at Mr. Partridge's suggestion. It leverages total plan assets up to 135% through the use of derivatives and up to 5% of total fund assets in “other investments” that do not fall within the stated asset allocation or tracking error limits.
“I envision full latitude to access any product as long as it is within tracking error,” Mr. Partridge told the board at the time.
http://www.pionline.com/article/20100405/PRINT/304059966/bonanza-prospec...
http://www.utsandiego.com/news/2009/sep/16/smelly-arrangement/
"Its different this time"
"Where's our airport asshole?"
The other shoe to drop (per U-T San Diego, 9/11/14): The old county pension fund manager was let go in 2009 because (gasp!) the fund lost money in 2008. Partridge was hired in 2009 for $1.4 million per year. The county had over a hundred qualified applicants at the old pay rate, $209k/year. A special arrangement was made to hire him at the $1.4 million in 2009. Somehow, quietly, between 2009 and 2014, his pay has jumped to over $10 million/year. Results? No idea, nobody has been talking about any results the last few years.
The return on an S & P 500 Index fund for the period 2009 to 2014 was a little over 18% per year. Partridge couldn't even score a 14% return a year during the Federal Reserve doped up bull market under Obummer. Money must be changing hands for Partridge to keep his job. I know, politicians on the take in California, unbelievable.
Gold, like copper, is a metal: contracts are paper and promises.
I'd be nervous about buying paper from China after the commodoties rehypothecation problems. If I want gold, I want possession of the physical metal, because gold has traditionally stored value better than rephyothecated promises.
The theory is that the Shanghai exchange is a physical delivery exchange, so you can always take delivery. I have my doubts, and in any case expect it to be well supplied by the bullion banks arbitraging GLD holdings through Shanghai, as soon as the opportunity presents itself.
I live in San Diego, and this story goes a lot deeper ZH's areticle touched on. Skipping over the fact that pension/ponzi accounting is fraud in the first place, SD has a long history of cronyism with its' pension funds. Having given testimony on several occasions over the past 15 years on the subject, let me just say that I was quite pleased when a friend was hired by the county, not the city.
"....let me just say that I was quite pleased when a friend was hired by the county, not the city."
Sure, so they could be paid by way of immoral property taxes instead of some other immoral taxes.
Good for them. Hopefully they've subscribed to some of the penny stock and options trading newsletters, as I see you can earn up to 1000% annual return by following their recos.
Well, as long as the market is rigged to always go up, no problemo.
. .
0
The Taxpayers are good for it. The Prospectus says so.
( 'Abandon Hope ALL Ye Who Enter Here' )
“Ms Yellen, could you please pick up line 5. There’s a Mr. Brian White somebody who wants to talk to you something about a Bailout. His voice is quivering but he’s mumbling something about ‘losing everything.’”
Why do I get the feeling that this guy is a cousin of Corzine???
Managed futures?? like the SUPA-Fund?
I miss those commercials.
Leaving hedge funds is a really bad idea. Hedge funds get lower returns than the index because they are always hedged (duh). This means the index will go up faster in a bull market, but it also means the index will crash harder in a bear market. Making a consistent 15% per year is far better than making 20% for a few years then losing 20% one year. Remember that gains are not arithmetic. They are geometric. Having 1 bad year of no gains has a profound effect on the net return because the years are the exponents when calculating return. 1 flat year is the difference between 1.1^30 (30 years of gains) and 1.1^29 (29 years of gains), which ends up being a big difference.
Retail investors (and pension managers?) fail to understand this, and that's why most people get lousy returns on their stocks. Slow and steady really does win the race when it comes to investing.
See below and "they ain't got nuthin' on Basis Traders."
Stay liquid, stay smart...
500:1 with $billions OPRS > Other Peoples Retirement Savings. No conflict there folks... Forward Soviets>
These types of situations need to be regulated. If you're unaccredited in the U.S. the leverage is limited to 50:1 in f/x and you can't trade CFD's. These assclowns shouldn't be allowed to trade OPM at these obscene leverages.
It's one thing if you're gambling with your own money, but playing the casino with OPM levered up, is bad medicine.
When his trades blow up it won't matter if they lynch everyone involved ( which they should have just for suggesting such fucking insanity ) because the money will already be Corzined into the black hole...
This might be a good reason to sell RE in San Diego and get outta dodge right now.
The taxes will go through the roof if the locals have to pay out against this busted pension fund and if the Feds step in the whole country will screeeeeeam for checks in every mailbox.
"Our current airport is fine!"
dial tone.. 9 1 1
"Emergency.. may I helllp you?"
"My name is Partridge.. I- I- I- am hiding in a Pear Tree from my investors.. "
"WHY?"
"Because I LOST it ALL .. ALL OF IT .. "
The Fed is in control - the wheel will always stop on black! It's not gambling when you can't lose.
Texas TRS is barely changing their allocation to HFs (1 percentage point). Has nothing to do with them abandoning the use of HFs, they're just lowering overall equity exposure to make room for a 5% risk parity allocation
MF Global was also involved in the "Managed Futures" business (by way of aquisition of Lind-Waldock - remember those commercials? https://www.youtube.com/watch?v=f0XhQQzhuB4).
The picture of the roulette table is spot on. Robert Maxwell the bouncing Czech and
owner of the Mirror group of newspapers did just that, gambled the pension fund in
a casino and lost. He fell off a boat and left his pensioners potless. Now residing in a
exclusive spot in the mount of olives.
http://en.wikipedia.org/wiki/Robert_Maxwell
Ian Robert Maxwell was born Ján Ludvík Hyman Binyamin Hoch into a poor[2][3] Yiddish-speaking orthodox Jewish family in the small town of Slatinské Doly[4] (now Solotvino, Ukraine), in the easternmost province of (pre-World War II) Czechoslovakia.
Hopefully that f**k is experiencing Dante's Inferno first hand and will burn in hell for eternity.
Many new Corzines will appear.
Blood will be shed this time, blood will be shed.
I'll believe it when I'm getting paid sextuple time $$$ to run a guillotine all night in Times Square and the fire hoses can't rinse it down the drain fast enough...
All he has to do is Buy Every Fuckin Dip!! and Voila......Moar money!!
"The board also gave Partridge a 25 percent raise back in June."
30-1 bets on double 00 and tipping the Croupier 25%.
Fucking brilliant.
It's..... Unbelievable. The criminals are so firmly in control...
ONE Person is running the whole Book??!
Chances of San Diego's Pension Fund going bust while levered at the Casino is 100%. Just a matter of TIME.
"Hello? Goldman Sachs? How do I SHORT this Fund.
Yeah. You'll juice up some OTC securites for me to bet against? SWEET. DO IT NOW."
ONE Person is running the whole Book??!
Are you serious? There are some good money managers and hedge funds out there. Maybe 5 but to allocate everything to this gambler. These people are idiots.
That's what happened with Orange County's bankruptcy in '94. Bob Citron was gambling it all with deriviatives, and lost huge:
https://en.wikipedia.org/wiki/Robert_Citron
"Orange County, which lost more than $1.6 billion in the bankruptcy, has recovered $739 million in settlements, including $400 million from Merrill Lynch & Company, the Wall Street firm that served as its financial adviser and as underwriter of $875 million of Orange County bonds. Morgan Stanley Dean Witter settled for $69.6 million, Nomura Securities for $47.9 million and Credit Suisse First Boston for $52.5 million. The county also reached settlements with a law firm and its accounting firm.
Those existing settlements will not be affected by Thursday's ruling, Mr. Hennigan said. He also said the county had reached, but not yet announced, settlements with three other parties, two of them securities firms. One is Bear, Stearns & Company, which agreed to pay $6 million $7 million. He would not identify the other two parties."
http://www.nytimes.com/1998/10/24/business/orange-county-is-set-back-in-...
It would be interesting to know who the 'other two parties' were, to have enough juice to keep the NYTimes from mentioning them by name, when they were naming everyone else.
On a side note, I had a friend whose family owned a jewelry store. A lot of investment raw stone business. Bob would come by on a weekly basis, and spend craploads of cash on the biggest and best stones and jewelry. They made a fortune on him. And after he was busted, I don't think any of the jewelry was recovered. The rumor was the wife had stashed it before the house was raided.
Now that was some 'trickle-down' economics at work.
"Partridge said he invests and trades on a daily basis, but said it is done to balance risk, not to seize on minute-by-minute market changes. The strategy is extremely unlikely to drain the county portfolio, he said"
Extremely unlikely to, until it does. The founders of LTCM thought they had a perpetual money making machine- until the market turned.
I still have a job, bail the failed pensioners out. It’s not their fault they were poor stewards. I can eat cat food from Aldi's.
As the big 5 investment banks amply demonstrated, leverage increases losses.
If I recall correctly, SDCERA once invested with Victor Niederfoffer & lost money. They said they invested a tiny amount of money with him (a few %) but was able to cover their losses with gains from other firms. No one knows the truth though.
During the Asian Financial Crisis of 1997, Niederhoffer lost $50 - $100 million in 2 days & his firm was destroyed after receiving a margin call from his bank. He invested in Thai financial stocks & was selling puts of S&P when the index was crashing.
http://www.youtube.com/watch?v=wo_9TeQMCEI
Only 500%, sheesh, they are just pikers compared to Corzine, Paulson, JPM and the lot.
Here it is again - it's so simple a caveman can understand it....
https://www.youtube.com/watch?v=-DT7bX-B1Mg
I remember sitting around in 2009 laughing at the prospect of CALPERS goldbricks eating dirt to survive on, Benanke took care of that and made them all plumpy again.
With people like these, is there any surprise?
"The QI Elves @qikipedia 41m
According to a 2012 poll, more Americans (16%) think that Barack Obama is a Muslim than accept the theory of evolution."
!
former CALPERS Board member dies in homosexual beatdown http://www.hispanicbusiness.com/2014/9/16/former_calpers_board_member_ch...
Sept. 16--Charles P. "Chuck" Valdes was one of the most powerful figures at America's largest public pension fund. But he led a troubled private life, dogged by bankruptcies and assorted ethical problems, and he'd been linked to a massive bribery scandal when he retired from public service four years ago
*The bribery scandal they refer to, was never prosecuted, criminally, they (CA) didn't even ask for the loot back (bribes were paid with checks, duh).
Here is the massive bribery scandal* backstory . http://calpensions.com/2012/06/21/cleanup-of-calpers-pay-to-play-scandal-lingers-on/
Unreal. I read some of it. His younger drug addict boyfriend had been bailed out of jail multiple times using CalPERs money? Seems like there is also some Mexico scamming of CalPERs. He took the fifth. I guess karma caught up to this scumbag.
From article and CalPers report. Public servants! LOL! They loot the public.
"His actions were inconsistent with the standards of care and loyalty expected of CalPERS board members and public servants entrusted to protect pension fund assets," the report added.
mmmm.... Lamb to the slaughter.
What is this pension everyone speaks of?
As the Comedian said:
"Just a matter of time I suppose".
I cannot think of a more perfect movie scene to describe what is about to happen.
https://www.youtube.com/watch?v=JoKUxxMBWSc
As soon as I saw the headline I knew it had to be Calpers. Quelle surprise, no?
trading 1M chart on euro dollar till inifniity
I posted this over at the other related article but felt it needed to be here as well. Two great videos from PBS, the retirement gamble and the seond is Cathy O'Neill who let's it roll on what goes on at hedge funds with retirement money. She's long out of the buisness as it was not her thing but both videos are great and love the roll of the eyes when asked if Larry Summers gave her an exit interview at DE Shaw.
http://ducknetweb.blogspot.com/2013/04/the-retirement-game-401k-complexi...
Corruption and stupidity are one thing. The real problem facing pension funds is the same one facing all forms of public finance, and, once we are forced to face it, all retirement investment. The looting and dismantling of the bond market. How can anyone invest safely for the long term in a ZIRP or NIRP environment? You can't. The money is being forced into stocks, and hedge-fund snake oil.
Here in Minneapolis another major water main broke today. Our water mains are mostly over 80 years old, except for the newer ones laid in the WWII era, when they were made out of waxed cardboard. They're breaking left and right. And we're not going to be able to pay for them on 0.5% annual returns, are we? So rather than do the prudent thing and fix stuff before it breaks, we're going to wait until it breaks, and then give everybody a massive property tax special assessment, no doubt.
When you cut open the goose to get all the shiny golden eggs, you can't get around the loss of future goosefeathers. Looting and dismantling the bond market, and then covering the losses with sub-inflation interest rates, sure did buy some banksters nice double-digit numbers of vacation homes. But all the rest of us are uck-fayed for generations as a result, unless and until we re-set all the unpayable debt back to its natural market value of $0.
The whole 'safe' Bond marker meme was always a crock.
Let's try a little thought experiment.
Say ALL the pensions are invested in Bonds for the safe returns. Now comes time for ALL the Boomers to retire: time for everyone to SELL Bonds.
Who buys ALL those Bonds? -With WHAT? It's not like the Govenment is gonna suddently buy it ALL back and pay off a significant portion of the national debt at exactly the moment the labor force severely contracts and tax receipts collapse.
What happens to the Bond market as the Bonds ar unleaded on an economy that cannot absorb the Bonds even as the Government is caught paying out ALL those latent Social Security and Medicare payments?
Ponzi Scheme is too mild a term for what has been done with the US Treasuey Bond complex.
shankapotomization