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Tag Archives: Investment outlook

Lots of Brain-Dead Misreporting About the Case-Shiller Home Price Index this Morning

Yves here. Those of you who remember the financial crisis and its aftermath no doubt recall how persistent real estate cheerleading was. So the notion that the flogging of Case-Shiller, very much a lagging real estate indicator, was merely the result of ignorance and laziness is charitable. By Wolf Richter, editor of Wolf Street. Originally published at Wolf Street OK, dear reader, I feel like I’m fighting a one-man battle against media misinformation or something. I didn’t want to descend...

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Board Member Margaret Brown Sues CalPERS, Board President Over Gang-Style Retaliation for Efforts to Oppose Its Incompetence

Pulitzer Prize winning reporter Mike Hiltzik has criticized the CalPERS board for “acting childishly” and wasting energy on “intramural bickering” and imposing sanctions on its pro-transparency, pro-accountability board members, first JJ Jelincic, more recently Margaret Brown rather than engage in oversight of the giant fund. But rather than focus on executing its fiduciary duty, the board has doubled down on acting as the staff’s enforcer and attacking dissidents who call out incompetence...

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CalPERS Plans to Blow Its Brains Out: Seeks to Increase Risk by Boosting Private Equity, Private Debt, and Leveraging the Entire Fund

CalPERS is acting exactly the way traders on Wall Street do when they are sitting on serious losses, or in CalPERS case, underfunding so deep that they can’t earn their way out of it. They put on desperate, high risk positions in the hope they can climb back out of their hole. Pros will tell you that this is just about always a fast path to ruin. CalPERS’ version of swinging for the fences is to increase its commitments to its riskiest strategy, private equity, embark on investing in a new...

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Private Equity Clearly Inferior to Public Equity: Delivers Similar Returns With Lower Liquidity

As more and more money has been chasing deals and private equity transactions have been consummated at nosebleed prices, the evidence that it’s not an attractive investment strategy has only continued to mount. As we’ll discuss, that raises the question of why investors continue to throw money at an assured loser on a risk/return basis. The latest negative finding comes from Ludovic Phalippou, an Oxford professor, reported in the Financial Times. We wrote up an earlier iteration of...

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Michael Hudson: Fed’s $10 Trillion Defends Assets of the Rich

Yves here. I trust you will enjoy Michael Hudson’s discussion of the Fed’s machinations and on the prospects for the economy. And please subscribe to Paul Jay’s new initiative, TheAnalysis, if you haven’t already! Interview by Paul Jay. Originally published at TheAnalysis The Federal Reserve is directly buying stocks, bonds, junk bonds, mortgages, junk mortgages, all to prop up the value of assets owned by the top 5%. This does not spur much new production or create jobs....

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Public Pension Plans in a World of Hurt; Even Loyalists Warning of Grim Prospects

US public pensions, unlike their Canadian counterparts, generally set themselves up for trouble by using unrealistically high return assumptions. The effect was to make pensions look cheaper than they were by understating the value of the liabilities and exaggerating the odds of earning enough to make good on them. Some systems made matters worse, in some cases like New Jersey, much worse, by choosing not to fund the pensions adequately. And then repeated applications of the...

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Is EIA Data Disguising A Disastrous Decline In U.S. Shale?

Yves here. Just as with never-gonna-earn-a-dime dot-com darlings, we’ve underestimated how long over-eager investors, in this case lenders, would keep the shale play going in the US. We did at least, following the take of the Financial Times’ John Dizard, that the party would go on until the money punchbowl was removed. It’s hard to see how shale companies can go on with super-cheap oil and gas as part of the new normal. As this story describes, while the President made all the right bailout...

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US Commercial Real Estate Prices Plunged in April, Mall Prices Collapsed

Yves here. Distress in commercial real estate is important not just in and of itself but also for its impact on long-term investors who’ve been active in these properties, such as pension funds and life insurers. By Wolf Richter.  Originally published at Wolf Street Before the coronavirus, some segments of commercial real estate (CRE) were red hot, others were hanging in there or declining, and one sector, malls, has been in deep trouble since 2016, with prices plunging. Then came the...

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More Public Pension Fund Pain: LACERS Reports Hit to Liquidity from Private Equity Capital Calls; Are Fund Managers Exploiting the Dumb Money Yet Again?

In case you managed to miss it, public pension funds are under stress, to the degree that Mitch McConnell bothered kicking them while they were down. And as we’ll show shortly, public pension funds are facing more pain due to private equity funds making them cough up money to meet capital calls. Public pension funds tight on available cash to pay benefits may wind up selling assets at fire-sale prices, as CalPERS did in 2009. But any pension fund that winds up making private-equity-induced...

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Taleb Questions CalPERS Ben Meng’s Competence and Honesty in Defending Missed $1 Billion Hedge Gain; Taleb Estimates CalPERS Net Loss on Meng’s “Alternative Mitigation” Over Two Years at $19 Billion

Nassim Nicholas Taleb, a celebrated expert on complex risks, in a video Taleb has graciously allowed Naked Capitalism to run exclusively, challenges CalPERS Ben Meng’s rationalizations of his decision to dump both of CalPERS’ two “left tail risk” hedging strategies. That call resulted in CalPERS giving up over $1 billion gain, or a 3600% return, on the bigger of the two hedges that CalPERS closed out first, prior to the market free fall. As we’ll show below, Taleb is reacting to Meng’s...

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