Author: Mary Pat Campbell

So … Is Bitcoin Going to Replace the Dollar?

Mary Pat Campbell

Link: https://www.ai-cio.com/news/bitcoin-going-replace-dollar/

Excerpt:

Bitcoin has been on a roll lately, rising in price five-fold over the past 12 months. Meanwhile, the US dollar, the world’s reserve currency, has lost 9% of its value.

All this has buoyed talk that someday Bitcoin in particular, or cryptocurrency in general, will replace the buck. Well, forget about that, argues St. Louis Federal Reserve President James Bullard, invoking the lessons of pre-Civil War days to warn about the chaos brought by a world of nonuniform currencies—that would be one where the buck isn’t king. 

Appearing on CNBC Wednesday, he predicted that “it’s going to be a dollar economy as far as the eye can see—a dollar global economy really as far as the eye can see—and whether the gold price goes up or down, or the Bitcoin price goes up or down, doesn’t really affect that.”

Author(s): Larry Light

Publication Date: 18 February 2021

Publication Site: ai-CIO

Pension Fund Assets in Largest Markets Rise 11% in 2020

Mary Pat Campbell

Link: https://www.ai-cio.com/news/pension-fund-assets-largest-markets-rise-11-2020/

Excerpt:

Pension fund assets within the world’s 22 largest markets saw double-digit gains for the second straight year in 2020, climbing 11% to $52.5 trillion, according to the 2021 “Global Pension Assets Study” from Willis Towers Watson’s Thinking Ahead Institute.

“In what was a highly tumultuous year, pension funds continued to grow strongly in 2020, underpinned by ongoing multi-decade themes such as the rotation from equities to alternatives and the growth of DC [defined contribution], now the dominant global pensions model,” Marisa Hall, co-head of the Thinking Ahead Institute, said in a statement.

Over the past five, 10, and 20 years, those assets have seen average annualized returns of 8.0%, 6.2%, and 6.1%, respectively, up from 5.3%, 6.5%, and 5.4%, respectively, over the same time periods last year.

Author(s): Michael Katz

Publication Date: 18 February 2021

Publication Site: ai-CIO

Mortgage Securities Deserve a Bigger Place in Pension Portfolios, DoubleLine Says

Mary Pat Campbell

Link: https://www.ai-cio.com/news/mortgage-securities-deserve-bigger-place-pension-portfolios-doubleline-says/

Excerpt:

Collateralized mortgage obligations (CMOs), which are collections of home-loan bonds, have long been a stalwart of insurers. But for other institutional investors, ownership is scant. DoubleLine Capital, the rising fixed-income power, would like to change that.

And it has some interesting research showing that CMOs dedicated to agency-guaranteed bonds, known as mortgage-backed securities (MBS), can book superior performance over time. MBS, of course, are pools of individual mortgages. Those that agencies support—Fannie Mae, Freddie Mac, and Ginnie Mae, chiefly—carry the pledge that Uncle Sam will cover any defaults.

Once-popular non-government-backed mortgage securities, which took a hit in the 2008 financial crisis, have diminished in volume. These so-called “private label” home-loan bonds dropped by half from then to now, to $1 trillion.

Author(s): Larry Light

Publication Date: 18 February 2021

Publication Site: ai-CIO

Growing Number of Pension Funds, Endowments, Foundations Adding Bitcoin to Portfolios

Mary Pat Campbell

Link: https://www.ai-cio.com/in-focus/market-drilldown/growing-number-pension-funds-endowments-foundations-adding-bitcoin-portfolios/

Excerpt:

The number of pension funds, endowments, and foundations adding Bitcoin to their portfolios has steadily risen over the past couple of years as the digital asset has gained more acceptance as an alternative asset.

Two pension funds in Fairfax, Virginia, began investing in late 2018 and 2019 in blockchain technology and Bitcoin through investments in two Morgan Creek Digital funds, which many consider the first investments in the crypto asset from a US pension fund. And a number of hedge funds, family offices, pension funds, endowments, foundations, asset managers, registered investment advisers (RIAs), and banks own Bitcoin outright through Boston-based Fidelity Digital Assets.

The world’s largest asset manager, BlackRock, recently said it is entering into the cryptocurrency business, according to US Securities and Exchange Commission (SEC) filings. BlackRock, which manages  $8.7 trillion, said in its SEC filings that it is seeking to add the Bitcoin futures investments to the BlackRock Global Allocation Fund and the BlackRock Strategic Income Opportunities Fund.

Author(s): Ellen Chang

Publication Date: 11 February 2021

Publication Site: ai-CIO

Opinion: The Democrats are still taxing their way out of Connecticut’s budget problems

Mary Pat Campbell

Link: https://www.courant.com/opinion/op-ed/hc-op-dem-budget-more-taxes-20210221-sjv6nz4kqffu3hrdrukk7lwcce-story.html

Excerpt:

Lamont’s budget does nothing to address the fact that Connecticut has some of the highest property taxes in the country. This massive tax burden hurts young families looking to settle down and grow; it hurts small businesses that have already been crushed by the pandemic; and it pushes seniors to find greener and cheaper pastures for retirement. The average Connecticut homeowner pays an astounding $5,327 per year — the highest property tax rate in New England. This puts us at a competitive disadvantage when our neighbors in New York and Massachusetts have more affordable property tax rates.

Nor does the governor do anything to address the structural budget deficits looming just over the hill. Instead, he reminds us we have a well-funded rainy-day fund and friends in Washington to bail us out. When your strategy is to drain your reserves and count on a global pandemic, you, in fact, have no strategy.

Author(s): Themis Klarides

Publication Date: 21 February 2021

Publication Site: Hartford Courant

Confessions of a Lapsed Allocator

Mary Pat Campbell

Link: https://www.institutionalinvestor.com/article/b1lhkrw4kqnn5m/Confessions-of-a-Lapsed-Allocator

Excerpt:

Public pension investment professionals spend too much time and effort fighting to do their jobs. Internal bureaucracy probably took up 25 percent of the total work hours of my small team. 

And it’s not about being lazy or unwilling to work hard. Consider, for example, an in-demand fund that had been in process for some time and finally created capacity — but required one month for work to be finished up before closing. Every week needed for internal paperwork, presentations, and hoop-jumping, well, that meant one less week of actual due diligence and investment debate. Or maybe we would have just passed on the manager, which is also suboptimal as it’s often the best-performing managers that require the most flexible processes.

This is counterproductive. And that’s not just an opinion. Research shows that the impact of due diligence in alternatives is meaningful for returns. Spending more hours doing actual research before making a decision results in higher returns, and the effect is more pronounced the greater the dispersion of returns. The act of getting that decision approved shouldn’t consume so much of a limited staff’s time. 

Author(s): Christopher Schelling

Publication Date: 5 May 2020

Publication Site: Institutional Investor

San Francisco wealth tax will fuel next blue exodus for rich earners

Mary Pat Campbell

Link: https://thehill.com/opinion/finance/527731-san-francisco-wealth-tax-will-fuel-next-blue-exodus-for-rich-earners

Excerpt:

That is what happened in San Francisco, where voters passed a wealth tax beyond efforts for the state or federal level. It is described as an “overpaid executive tax” which would apply to those firms in the city which pay their officers more than 100 times the median worker salary. While decisions on whether to enact tax hikes are best left to local residents instead of to the bureaucrats in Sacramento or the District of Columbia, the new wealth tax in San Francisco could now create unintended negative effects, including a significant exodus of rich earners who move out of the city.

The Bay Area is home to the widest income gap in California. Those local residents in the top 90th percentile earned over 12 times more than those local residents in the bottom 10th percentile. The combination of historic market policies and current socialist policies established such separation of classes in the state. The success of the technology industry in tandem with high tax rates and building restrictions created this situation where someone could earn over $100,000 a year and live in his car.

Author(s): KRISTIN TATE

Publication Date: 27 November 2020

Publication Site: The Hill

Tiny-Company Boom Makes Markets Look Silly

Mary Pat Campbell

Link: https://www.wsj.com/articles/tiny-company-boom-makes-markets-look-silly-11613666534?mod=itp_wsj&ru=yahoo

Excerpt:

Stocks come and go, but every year a few tiny companies get promoted to the small-capitalization indexes. Some eventually make it all the way to the S&P 500.

What they don’t do is go in the space of 18 months from being a penny stock with a market value of $39 million to be worth more than a dozen S&P 500 companies, yet that is exactly what FuelCell Energy Inc. has done.

FuelCell isn’t alone. Fourteen members of the Russell Microcap index have risen so much that they ended Thursday larger than the smallest S&P stock. One, real-estate broker eXp World Holdings , has a market capitalization of nearly $10 billion, more than double the smallest S&P stock. When the index reset was announced last year, the largest stock in the index had a market capitalization of $840 million.

Author(s): James Mackintosh

Publication Date: 18 February 2021

Publication Site: Wall Street Journal

Online-Trading Platform Will Let Investors Bet on Yes-or-No Questions

Mary Pat Campbell

Link: https://www.wsj.com/articles/online-trading-platform-will-let-investors-bet-on-yes-or-no-questions-11613557800

Excerpt:

Kalshi Inc. expects to launch in March. It plans to let users bet on “yes” or “no” answers to questions about future events. For instance, had the platform existed last year, it might have asked users whether a Covid-19 vaccine would be approved by the end of 2020.

The San Francisco-based startup hopes to benefit from surging interest in trading by individual investors. Individuals have jumped into stocks and options during the past year, using apps like those offered by Robinhood Markets Inc. Kalshi also hopes its marketplace will be used by people and businesses looking to hedge against risks that they face from future events.

Kalshi’s fundraising round comes after it won approval from the Commodity Futures Trading Commission in November to run a derivatives exchange. Sequoia led the Series A round, which brings the total money raised by Kalshi since its 2018 founding to about $36 million.

Author(s): Alexander Osipovich

Publication Date: 17 February 2021

Publication Site: Wall Street Journal

Munis end with largest increase in yields in a week since COVID-induced turmoil

Mary Pat Campbell

Link: https://fixedincome.fidelity.com/ftgw/fi/FINewsArticle?id=202102191549SM______BNDBUYER_00000177-baa7-d4af-a9f7-bfb72adb0001_110.1

Excerpt:

Municipals ended weaker Friday with triple-A benchmark curves rising the most in a week since COVID-19 disrupted all markets in March and April of last year.

Muni yields rose another five basis points on the 10- and 30-year Friday, bringing the total cuts to scales to 18 and 17 basis points, respectively, from Tuesday as the asset class moved closer to U.S. Treasury movements after lagging weakness in taxables since the start of the year. Treasury yields hit 1.35% in 10-years and 2.15% in 30 after news of stimulus out of Washington gaining ground.

“In the past several days, tax-exempts have finally started to react, and while it remains to be seen if the adjustment will be minor or a bigger move, an overall defensive portfolio stance is warranted,” said Mikhail Foux, municipal strategist at Barclays (BCS). “At the current extremely low ratios, one could consider whether to buy extremely rich high-quality tax-exempts or simply purchase Treasuries instead, which even accounting for the tax-exemption make more sense, especially for short and medium-dated bonds.”

Author(s): Christine Albano

Publication Date: 19 February 2021

Publication Site: Fidelity Fixed Income

Texas storm may cost insurers record first-quarter losses – A.M. Best

Mary Pat Campbell

Link: https://www.reuters.com/article/us-usa-weather-texas-insurance-idUSKBN2AJ2IS

Excerpt:

 Insurers could suffer record first-quarter catastrophe losses after the historic Texas winter storm, which crippled the state’s electrical grid and caused extensive property damage including collapsed roofs and broken pipes, insurer credit rating agency A.M. Best said on Friday.

The storm occurred during a quarter that is typically the most benign for catastrophe losses, and could become the costliest winter weather event in Texas history, A.M. Best said in a report.

The Texas Department of Insurance plans to collect data from property insurers to assess costs stemming from the crippled electrical grid, roofing collapses, broken pipes and other problems, a spokesman said.

Author(s): Suzanne Barlyn

Publication Date: 19 February 2021

Publication Site: Reuters

Illinois budget gimmicks continue; we have an opportunity to fix them!

Mary Pat Campbell

Link: https://www.truthinaccounting.org/news/detail/illinois-budget-gimmicks-continue-we-have-an-opportunity-to-fix-them#new_tab

Excerpt:

Cash basis accounting allows governments to ignore long-term liabilities, such as the pension and health care promises they made to their government workers, teachers, and firefighters. It also allows governments to shift money around or borrow money to make the budget appear balanced. This method is so deceptive that the IRS does not allow corporations making more than $26 million per year to use it. 

In his address, Gov. Pritzker highlighted that the budget includes the “full required pension payments,” which amounts to $9.3 billion. These payments are based upon a pension funding scheme so outrageous that an SEC official called it a “balloon payment on steroids.” 

After the state was charged with securities fraud for making such claims in bond offerings, the state had to start being honest in its bond offering documents. In the official statement related to the Illinois General Obligations Bonds of October 2020 is the following quote: “The State’s contributions to the retirement systems, while in conformity with State law, have been less than the contributions necessary to fully fund the retirement systems as calculated by the actuaries of the retirement systems.” These actuaries say the amount required to properly fund the pensions is $14.5 billion, which is $5.2 billion higher than the amount included in the Governor’s budget.

Author(s): Sheila Weinberg

Publication Date: 17 February 2021

Publication Site: Truth in Accounting