The Wharton professor Jeremy Siegel has a big issue with the Federal Reserve’s aggressive interest-rate hikes in its bid to tame inflation, and he’s worried that the central bank is making the biggest mistake in its history and may provoke a steep recession.
Siegel said inflation is starting to come down significantly, but the Fed is still moving forward with its rate hikes.
He said it could be “one of the biggest policy mistakes in the 110-year history of the Fed, by staying so easy when everything was booming.”
“I think the Fed is just way too tight. They’re making exactly the same mistake on the other side that they made a year ago,” Siegel added.
To Siegel’s point, the Fed has had a lousy record of accurately forecasting where it expects interest rates to be just a few months into the future.
“I am very upset. It’s like a pendulum. They were way too easy through 2020 and 2021, and now ‘we’re going to be real tough guys until we crush the economy,'” Siegel said of the Fed.
Siegel expects the Fed to “eventually see the light” as none of their recent predictions are likely to come true.
Pressley, alongside Senate Majority Leader Chuck Schumer (D-NY), and Senator Elizabeth Warren (D-MA) have repeatedly called on Biden to cancel $50,000 in student loan debt immediately via executive order on the premise that there is sufficient legal backing for the administration to do so.
The Fed researchers, using data from the New York Fed/Equifax Consumer Credit Panel, estimated the cost of two federal loan forgiveness proposals, one for $10,000 and another for $50,000. They found that limited forgiveness and placing income caps on who would be eligible would “distribute a larger share of benefits” to low-income borrowers while also reducing the cost of forgiveness.
Rep. Pressley has repeatedly stressed that women and people of color hold significant levels of student loan debt and that cancellation would represent a massively impactful form of relief given the disproportionate burden.
British pension funds are ramping up their investment in Chinese companies despite growing tensions between the West and the Communist state.
According to a new report by Hong Kong Watch, a pro-democracy advocacy group, the amount of cash invested by Western pension funds and other institutional investors in China has hit a record high in recent months.
It comes amid rising criticism in the West about China’s human rights record, including its brutal treatment of Uighur Muslims and its suppression of democracy campaigners in Hong Kong.
The report cites the Universities Superannuation Scheme (USS), one of the UK’s largest private pension schemes, and Legal & General, Britain’s biggest pensions manager, as two British firms with “problematic” investments in China.
It found that L&G’s China fund was previously investing UK pensions in Zhejiang Dahua Technology, which is alleged to produce facial recognition software for the Communist Party that detects the race of individuals and alerts the police when it identifies Uighur Muslims.
L&G has since divested from Zhejiang Dahua Technology.
Growing investor angst about China’s real estate crackdown rippled through markets on Monday, adding pressure on Xi Jinping’s government to prevent financial contagion from destabilizing the world’s second-largest economy.
Hong Kong real estate giants including Henderson Land Development Co. suffered the biggest selloff in more than a year as traders speculated China will extend its property clampdown to the financial hub. Intensifying concerns about China Evergrande Group’s debt crisis dragged down everything from bank stocks to Ping An Insurance Group Co. and high-yield dollar bonds. One little-known Chinese property developer plunged 87% before shares were halted.
Hong Kong’s benchmark Hang Seng Index slumped 3.3%, its biggest loss since late July. The selling also spilled over into the Hong Kong dollar, offshore yuan and S&P 500 Index futures. Holiday closures in much of Asia may have exacerbated the volatility, traders said.
“The repercussions from Evergrande’s prospective collapse will likely contribute to China’s ongoing economic deceleration, which in turn anchors global growth and inflation, and casts a pall over commodity prices,” wrote analysts led by Phoenix Kalen, head of emerging-market strategy in London.
The Fairfax County Police Officers Retirement System and Fairfax County Employees’ Retirement System are planning to invest, pending board approvals, a total of $50 million in Parataxis Capital Management LLC’s main fund, which buys various digital tokens and cryptocurrency derivatives.
The outlays come on the heels of the Fairfax funds — which together manage about $7.15 billion — investing several times in Morgan Creek Asset Management funds, and, earlier this year, in crypto venture firm Blockchain Capital. While some of these investments ended up going into coins like Bitcoin, the majority was invested into technology startups, so Fairfax considered them venture-capital investments. Parataxis, with its focus on actual coins, is different.
But that same volatility can lead to outsized returns, which have been one reason for Fairfax’s expanded investment. Molnar’s $1.95 billion police retirement fund was planning for 2% exposure to crypto via Morgan Creek and Blockchain Capital, but at the end of June crypto accounted for 7% of assets, due to appreciation, she said. Although Molnar couldn’t discuss exact appreciation, crypto “was not an insignificant contributor to performance” in the second quarter, she said.
(Bloomberg) — The U.S. Treasury Department is sending a message to states and cities that the billions in aid from the American Rescue Plan should provide relief to residents, not their governments’ debt burdens.
The department on Monday released guidance on how state and local governments can use $350 billion in funding from President Joe Biden’s $1.9 trillion rescue package. The funds are intended to help states and local governments make up for lost revenue, curb the pandemic, bolster economic recoveries, and support industries hit by Covid-19 restrictions. In a surprise to some, these funds can’t be used for debt payments, a potential complication for fiscally stressed governments that had already etched out plans to pay off loans.
Illinois Governor J.B. Pritzker had suggested using some of the state’s $8.1 billion in aid to repay the outstanding $3.2 billion in debt from the Federal Reserve’s emergency lending facility and to reduce unpaid bills. Illinois was the only state to borrow from the Fed last year, tapping it twice. On Tuesday, Jordan Abudayyeh, a Pritzker spokesperson, said the administration is “seeking clarification” from the Treasury on whether Illinois can use the aid to pay back the loan from the Fed.
The rule could also affect New Jersey, which sold nearly $3.7 billion of bonds last year to cover its shortfall during the pandemic. Assembly Republican Leader Jon Bramnick, a Republican, in April had called for Governor Phil Murphy, a Democrat, to use some of the federal aid to pay down the state’s debt.
Retiring early seems to be on everyone’s minds these days. The growing popularity of the so-called FIRE movement — short for financial independence, retire early — is a testament to how much everyone seems to be craving a slice of “the easy life.” The good news is that in many U.S. states, what most people would call an “early” retirement is within reach. Although “full retirement age” for Social Security purposes isn’t until age 67, the average retirement age in every single state — with the exception of the District of Columbia — is below 67. On average, retirees in the U.S. hang up their work boots at age 64, according to Money Talks News.
Of course, to truly live a comfortable retirement takes more than desire — it also takes a large chunk of cash.
If nothing else, this study proves two things. First, the state in which you live can play a big role in how early you can retire, as evidenced by the low average retirement ages across wide swaths of the South and Midwest. Next, it takes more than $1 million to have a comfortable retirement in any state in America — or over $2 million in the case of Hawaii and the District of Columbia — so it’s important to work with a retirement advisor or the best 401(k) providers to help boost your savings as much as possible.
Two of Australia’s largest pension funds moved a step closer to creating a A$200 billion ($155 billion) giant as the world’s fourth-biggest pension pot consolidates.
QSuper and Sunsuper Pty. have signed a deal to merge, the two funds said in a joint statement Monday. The Brisbane-based funds will combine by September to create the country’s second-largest pension fund.
QSuper has about A$120 billion in funds under administration and looks after the retirement savings for Queensland state government employees. Sunsuper has about A$80 billion in savings for employees of corporations including Unilever Plc and Virgin Australia.
Biden also wants other big tax changes, such as a higher business tax rate and higher rates for households earning more than $400,000. But he might want to start with capital-gains and estate taxes because they’re easier to target at the wealthy. The top 1% of earners capture 69% of long-term capital gains, while the top 20% of earners earn 90% of the capital gains. That shareholder class has benefited most from fiscal and monetary stimulus that has propped up the stock market for the last 11 months and helped with a decade of generous gains. If anybody can afford it, they can.
As for the estate tax, only about 1,900 U.S. estates are subject to any federal tax, which is less than one-tenth of 1% of the Americans who die in a given year. The number of estates subject to this tax was three times higher in 2009, the last year the exemption threshold was $3.5 million. Since Biden wants to return to that ceiling, assume he’d triple the number of families having to pay some estate tax. It still remains a vanishingly small number. Plus, unlike the wealth tax, it has been the law before, and there’s no question of whether it would work.
Italy is making its first foray into the green bond market, the latest major debt issuer to tap into one of the fastest-growing sectors of finance.
The nation is selling debt maturing in 2045 via banks, an unusual tenor that is expected to draw interest from domestic investors as well as specialist environmental funds. European nations are piling into the market as they seek to finance a greener recovery from the pandemic.
As interest-rate jitters supercharged a meltdown in the world’s biggest bond market, Sam Sicilia barely blinked.
“The markets are wrong” about inflation expectations, said Sicilia, chief investment officer of the A$56 billion ($43 billion) Host-Plus Pty pension fund in Melbourne. “Deflationary forces are bigger. Interest rates are going to stay at effectively zero.”
With governments around the globe still adding to trillions of dollars of stimulus to ride out the pandemic, pension fund managers who are trying to discern the long-term effects are posing the question: Will inflation make a comeback? If it does, more than $46 trillion of global pension assets would be affected as central banks pivoted toward sustained higher interest rates.
The Senate parliamentarian approved provisions in Joe Biden’s $1.9 trillion pandemic-relief bill aiding multi-employer pensions and providing laid-off workers with health-care premium subsidies.
Senate parliamentarian Elizabeth MacDonough has found that provisions bailing out multi-employer pensions and providing laid-off workers with health-care premium subsidies are eligible for the simple-majority process Democrats are using to pass the pandemic-relief bill.
“This economic crisis has hit already struggling pension plans like a wrecking ball, and the retirement security of millions of American workers depends on getting this package across the finish line,” Senate Finance Chair Ron Wyden said in a statement after his office said the parliamentarian made the two approvals.