Two Top Pennsylvania Pension Fund Officials to Retire Amid Federal Probe

Link:https://www.wsj.com/articles/pennsylvania-pension-cio-jim-grossman-to-resign-amid-federal-probe-11637243641

Excerpt:

Two top officials at Pennsylvania’s largest pension fund are retiring amid a federal investigation and calls by some board members for their ouster.

The board of Pennsylvania’s $64 billion Public School Employees’ Retirement System voted Thursday to approve resolutions accepting the retirement of Glen Grell, the executive director, and Jim Grossman, the chief investment officer. Board members approved plans for both men to stay on in temporary advisory positions and authorized the board chair to begin a search for their replacements.

The fund has been racked by turmoil since board members learned in March that a report of investment returns was too high. The accurate figure was low enough to trigger an increase in payments from employees that the plan serves. Investigations conducted by the fund haven’t found wrongdoing on the part of investment staff.

The board said in April that it had hired law firms to investigate the miscalculation and to respond to a federal grand jury subpoena requesting documents. The pension declined to comment on what information the grand jury is seeking.

Author(s): Heather Gillers

Publication Date: 18 Nov 2021

Publication Site: Wall Street Journal

Biden to Nominate Jerome Powell for Second Term as Federal Reserve Chairman

Link:https://www.wsj.com/articles/biden-will-tap-jerome-powell-for-new-term-as-fed-chairman-11637589600?mod=hp_lead_pos1

Excerpt:

President Biden said he would nominate Federal Reserve Chairman Jerome Powell to a second term leading the central bank, opting for continuity in U.S. economic policy despite pushback from some Democrats who wanted someone tougher on bank regulations and climate change.

Mr. Biden said he would also nominate Fed governor Lael Brainard as vice chairwoman of the central bank’s board of governors. Prominent liberals like Sen. Elizabeth Warren (D., Mass.) had warned the president against picking Mr. Powell, and progressive groups mounted a last-ditch campaign to pressure the president to tap Ms. Brainard for the top job.

Author(s): Nick Timiraos and Andrew Restuccia

Publication Date: 22 Nov 2021

Publication Site: Wall Street Journal

Newly Flush With Cash, Retirement Funds Struggle to Find Appealing Investments

Link:https://www.wsj.com/articles/newly-flush-with-cash-retirement-funds-struggle-to-find-appealing-investments-11636293602?mod=e2tw

Excerpt:

California transferred an extra $2.31 billion to its teachers’ and public workers’ pension funds after stock gains and the economic recovery bolstered income tax collections, according to budget documents. Connecticut Treasurer Shawn Wooden is transferring an additional $1.62 billion to that state’s teachers’ and workers’ pension funds in accordance with a mandate that excess revenue be used to pay down debt.

This year New Jersey is making the full pension payment recommended by its actuaries for the first time since 1996, plus an extra half-billion dollars, funneling a total of $6.9 billion to the state’s deeply underfunded retirement plan, the New Jersey treasurer’s office said.

Asked how the money would be used, a spokeswoman for the state’s division of investment said it “will continue to move forward toward the previously established allocation targets.” The $101 billion fund’s private equity, private credit, real estate and real assets portfolios each contained between $1 billion and $3 billion less than the goal amount as of Aug. 31, records show.

Author(s): Heather Gillers

Publication Date: 7 Nov 2021

Publication Site: Wall Street Journal

Who’s Quitting Their Jobs? New Data Show Some Workers Are More Likely Than Others

Link:https://www.wsj.com/articles/as-american-workers-leave-jobs-in-record-numbers-a-closer-look-at-who-is-quitting-11636894801

Excerpt:

Workers resigned from a record 4.4 million jobs in September, according to Labor Department data, and new surveys show that low-wage workers, employees of color and women outside the management ranks are those most likely to change roles. The findings signal that turnover isn’t evenly spread across the U.S. workforce even as employers across industries struggle to fill a variety of roles.

The overall percentage of people considering leaving their jobs — about three in 10, according to research by consulting firm Mercer LLC — is fairly consistent with historical trends. But sentiment varies across demographics and occupations. While front-line and low-wage positions typically see high rates of turnover, for example, employees in those roles are especially likely to leave now, Mercer found in a survey of 2,000 U.S. workers conducted in August.

….

Nearly half of low-wage and front-line workers surveyed said their pay and benefits were insufficient while 41% said they felt burned out from demanding workloads. Some 35% of Black employees and 40% of Asian employees said they were considering leaving, compared with 26% of white employees.

Author(s): Kathryn Dill

Publication Date: 14 Nov 2021

Publication Site: WSJ

Covid-19 Breakthrough Hospitalizations Concentrated Among Most Vulnerable

Link:https://www.wsj.com/articles/covid-19-breakthrough-hospitalizations-concentrated-among-most-vulnerable-11637499602

Graphic:

Excerpt:

At the Medical University of South Carolina, nearly all fully vaccinated Covid-19 patients in the ICU have weak immune systems from prior health problems, said Andrew Goodwin, the section chief of critical care. The rest are elderly, which can also compromise the body’s defense against illness.

Truveta Inc., a firm that aggregates hospitals’ medical data for research, found among 1.7 million fully vaccinated people that those with diabetes, chronic lung disease and chronic kidney disease were about twice as likely to be hospitalized for breakthrough cases as vaccinated people without these conditions.

The likelihood of having a breakthrough infection was still low, though confirmed infections were more common for people with these illnesses. About 1.5% of roughly 110,000 people with chronic kidney disease had one, for example. But Truveta found about a quarter of breakthrough patients with chronic kidney disease wound up hospitalized. The likelihood of hospitalizations for people with breakthrough cases but without underlying health problems was about 7.5%.

Breakthrough deaths are hitting older people the hardest, amplifying a well-worn pandemic pattern. Exclusive data the Journal reviewed from the Epic Health Research Network, which analyzes data from the medical-record software company Epic Systems Corp., shows about 80% of breakthrough deaths among the vaccinated are in people ages 65 and older. The data included records for 19.5 million fully vaccinated people. Among all Covid-19 deaths this year, that age group represents closer to 69%, according to the CDC.

Author(s): Jon Kamp, Melanie Evans

Publication Date: 21 Nov 2021

Publication Site: Wall Street Journal

Inflation Surge Whips Up Market Froth

Link:https://www.wsj.com/articles/inflation-surge-whips-up-market-froth-11636817049

Excerpt:

Last week, real yields, which take into account the corrosive effects of inflation, hit some of their lowest levels on record. One measure of real yields, 10-year Treasury inflation-protected securities, fell to minus 1.2%, according to Tradeweb. That is the lowest on record, according to data going back to February 2003.

In essence, with real yields negative, the purchasing power of money invested will decline over the lifetime of those bonds.

Real yields have fallen because of colliding factors. These include the highest inflation rate in over three decades combined with nominal bond yields that have risen only modestly as central banks hold back from raising rates.

The prospect of negative returns on super safe inflation-protected bonds has pushed investors to buy riskier assets.

Author(s): Anna Hirtenstein

Publication Date: 14 Nov 2021

Publication Site: Wall Street Journal

Elizabeth Warren’s War on Accounting

Link:https://www.wsj.com/articles/elizabeth-warren-accounting-standards-corporate-minimum-tax-fasb-reconciliation-taxation-11636921275

Excerpt:

The Democrats’ proposed 15% levy on the world-wide financial-accounting earnings of large, highly profitable companies may sound familiar. It was originally proposed by Sen. Elizabeth Warren during her bid for president. Democrats are pushing this tax again now, hoping it will encourage passage of a $1.85 billion reconciliation bill to fund President Biden’s Build Back Better plan.

Any plan to tax financial-accounting earnings is ill-conceived, as I argued on these pages in May 2019. Blurring the lines between taxable income and financial-accounting profit would inevitably lead to political meddling in financial-accounting rules and damage the usefulness of financial accounting for investors.

…..

Politicians and the FASB have vastly different objectives. Financial-accounting rules are created by the apolitical FASB to provide information useful to investors. In contrast, tax-accounting rules are largely determined by Congress to achieve such objectives as raising revenue, encouraging or discouraging certain behavior, and redistributing wealth. Two accounting systems are necessary, one for pursuing social objectives through the tax system, the other for giving investors comparable, reliable and timely information. The U.S. is not unique in this regard. Every developed country has a tax-accounting system that is separate from its financial-accounting system.

Because the objectives of the two systems are different, the income they compute is different. 

…..

If Congress wants to raise more revenue and prevent companies from reporting low tax rates, it should change the tax code. 

Author(s): Scott Dyreng

Publication Date: 14 Nov 2021

Publication Site: Wall Street Journal

High Inflation Creates Tax Winners and Losers. What Are You?

Link:https://www.wsj.com/articles/high-inflation-creates-tax-winners-and-losers-what-are-you-11634981401

Excerpt:

As inflation trends near a 13-year high, middle-income workers will benefit from automatic annual adjustments to tax provisions such as the standard deduction for income taxes. Some other provisions are frozen in time, stuck to specific dollar amounts from decades ago. Those provisions tend to pinch higher-income households.

For example, the standard deduction for married couples is likely to rise to $25,900 from $25,100, according to Wolters Kluwer NV, which provides tax services to accountants and others. As nominal wages and prices rise, that adjustment will shield more money from taxation and block inflation — currently above 5% on an unadjusted annual rate — from causing a sharp tax increase.

Some home sellers, however, will be squeezed because married couples can exclude up to $500,000 in gains from capital-gains taxes. That figure hasn’t changed since a 1997 law, while the median home sale price has more than doubled since then.

Author(s):Richard Rubin

Publication Date:23 Oct 2021

Publication Site:WSJ

What Pension Funds’ Riskier Strategies Mean for Future Retirees

Link:https://www.wsj.com/podcasts/google-news-update/what-pension-funds-riskier-strategies-mean-for-future-retirees/439e4dbc-86f1-4431-8ada-14345feb42fd

Excerpt:

Heather Gillers : So alternative investments are typically not assets that can be traded on the public market like stocks and bonds, where you know the price, you can buy them and sell them any time. They’re fairly liquid, very liquid. Alternative assets. On the other hand, are private market assets, they’re typically illiquid. So examples would be like private equity where you’re investing in private companies, not in publicly traded stocks, or infrastructure like roads and bridges, or real estate, apartment buildings, hedge funds was a long time popular alternative asset that’s lost some of its favor with public pensions. Private credit is one that’s gaining steam. That’s private loans to companies. Not bonds that are traded on the public markets, but private loans.

J.R. Whalen : So from an investment perspective, how are these alternatives different from traditional things like stocks and bonds?

Heather Gillers : So stocks and bonds are traded on public markets. You can pretty much always find a buyer. You can always find out how much it costs. And most importantly, like you can pretty much cash out any time. Whereas an alternative investment, you’re probably planning to hold it for 5 or 10 years at the minimum. And if you do have to sell it in an emergency, you could end up getting a lot less than you hoped.

Author(s): Heather Gillers, J.R. Whalen

Publication Date: 20 Oct 2021

Publication Site: WSJ podcasts

Your New Woke 401(k)

Link:https://www.wsj.com/articles/your-new-woke-401-k-retirement-savings-esg-erisa-biden-administration-department-of-labor-proposal-11634753095

Excerpt:

While Democrats in Congress negotiate over trillions of dollars in new spending, the Biden Administration is quietly advancing its agenda through regulation. Witness a little-noticed proposed rule last week by the Labor Department that will add new political directives to your retirement savings.

The Administration says the rule will make it easier for retirement plans to offer 401(k) funds focused on ESG (environmental, social and governance) objectives. In fact, the rule will coerce workers and businesses into supporting progressive policies.

An important Trump Labor rule last fall reinforced that the Employee Retirement Income Security Act (Erisa) requires retirement plan fiduciaries to act “solely in the interest” of participants. The rule prevented pension plans and asset managers from considering ESG factors like climate, workforce diversity and political donations unless they had a “material effect on the return and risk of an investment.”

The Biden DOL plans to scrap the Trump rule while putting retirement sponsors and asset managers on notice that they have a fiduciary duty to include ESG in investment decisions. The proposed rule “makes clear that climate change and other ESG factors are often material” and thus in many instances should be considered “in the assessment of investment risks and returns.”

Author(s): WSJ editorial board

Publication Date: 20 Oct 2021

Publication Site: WSJ

An Ohio Pension Manager Risks Running Out of Retirement Money. His Answer: Take More Risks.

Link:https://www.wsj.com/articles/an-ohio-pension-manager-risks-running-out-of-retirement-money-his-answer-take-more-risks-11634356831

Graphic:

Excerpt:

Mr. Majeed is the investment chief for an $18 billion Ohio school pension that provides retirement benefits to more than 80,000 retired librarians, bus drivers, cafeteria workers and other former employees. The problem is that this fund pays out more in pension checks every year than its current workers and employers contribute. That gap helps explain why it is billions short of what it needs to cover its future retirement promises.

“The bucket is leaking,” he said.

The solution for Mr. Majeed — as well as other pension managers across the country — is to take on more investment risk. His fund and many other retirement systems are loading up on illiquid assets such as private equity, private loans to companies and real estate.

So-called “alternative” investments now comprise 24% of public pension fund portfolios, according to the most recent data from the Boston College Center for Retirement Research. That is up from 8% in 2001. During that time, the amount invested in more traditional stocks and bonds dropped to 71% from 89%. At Mr. Majeed’s fund, alternatives were 32% of his portfolio at the end of July, compared with 13% in fiscal 2001.

Author(s): Heather Gillers

Publication Date: 16 Oct 2021

Publication Site: WSJ

How Malaria Brought Down Great Empires

Link:https://www.wsj.com/articles/how-malaria-brought-down-great-empires-11634320669

Excerpt:

Malaria could stop an army in its tracks. In 413 BC, at the height of the disastrous Sicilian Expedition, malaria sucked the life out of the Athenian army as it lay siege to Syracuse. Athens never recovered from its losses and fell to the Spartans in 404 BC.

But while malaria helped to destroy the Athenians, it provided the Roman Republic with a natural barrier against invaders. The infested Pontine Marshes south of Rome enabled successive generations of Romans to conquer North Africa, the Middle East and Europe with some assurance they wouldn’t lose their own homeland. Thus, the spread of classical civilization was carried on the wings of the mosquito. In the 5th century, though, the blessing became a curse as the disease robbed the Roman Empire of its manpower.

Throughout the medieval era, malaria checked the territorial ambitions of kings and emperors. The greatest beneficiary was Africa, where endemic malaria was deadly to would-be colonizers. The conquistadors suffered no such handicap in the New World.

Author(s): Amanda Foreman

Publication Date: 15 Oct 2021

Publication Site: WSJ