.

[The-Shoveler]

[quote=CA renter][quote=The-Shoveler]It’s very simple really,

When the City files BK, it does so in Federal court.

If the Federal court over rules the State Law saying that “public employee pensions cannot be diminished or impaired”

Well I guess that’s where the real battle begins.

Interesting times.[/quote]

Employee compensation (including pensions), are priority claims. The only question is how they will determine the limits of the priority claims for a municipal BK, as opposed to limits for a business BK. Bondholders do not have priority claims.[/quote]

Thing is who will want to buy Muni-bonds in the future ?

There is going to have to be much high interest to get people to buy Muni’s in the future especially if they take the whole hit me thinks.

I think this is where Stockton’s case is still interesting.

Buffett recently got out of the Muni-bond insurance biz by the way.

[no_such_reality]

They’ll just hide the interest rate in capital appreciation bonds. And places like CalPERs will still buy them.

Frankly, I hope they stick it to the bondholders.

If they don’t, I hope they stick it to the employees.

The worst thing IMHO will be if they don’t stick it to anybody and they keep kicking the can down the road. The best thing for everyone is if it’s really clear who’s holding the bag when the music stops.

Trying to make it so everybody gets cut a little bit is the worst case scenario as it encourages everybody to keep going and just pump up for a bigger pay day so they’re still whole when they get the little cut.

I’d love to see them keep the employees whole so we can watch cities die as they get stripped of services to fund the retirement gaps.

Or survive. Either way, die cause too much funding is going to cronyism and retirement and the tax base abandons it, or keep it whole and survive, but we need some high profile examples.

[The-Shoveler]

So you got City Pensions buying City Bonds so they can afford to pay the city pensions,

Just kidding, but it looks a little like the fed buying treasuries LOL

[livinincali]

[quote=The-Shoveler]So you got City Pensions buying City Bonds so they can afford to pay the city pensions,

Just kidding, but it looks a little like the fed buying treasuries LOL[/quote]

For now. Just wait until pension funds are net sellers rather than net buyers in the not too distant future.

[The-Shoveler]

Or it’s their turn getting Sc###! in the next BK round,

[CA renter]

[quote=livinincali][quote=CA renter]
Mind you, CalPERS used to manage almost everything in-house and had tight restrictions WRT what they could invest in — almost exclusively Treasuries with some smaller allocations to very highly-rated municipal and corporate debt. Wall Street lobbied hard both to change their allocations to riskier investments (those lovely “innovations” created by Wall Street, included), and then lobbied to have outside managers and consultants at the public pension funds. If not for those changes — the PRIVATIZATION movement at work — the “pension crisis” would be much less significant than it is today, if it were to exist at all.

So…how’s that “privatization” thing working for you?[/quote]

Well it would be really tough to assume a 7.5% rate of return if you had to put most of you assets into treasuries and highly rated debt. Most of that is paying somewhere between 2 and 4% now and has been for awhile. If you have to assume 3-5% rates of return you’re screwed anyways.[/quote]

Because of their long-term horizon, they’re able to get into long-term bonds. They have the flexibility to buy longer-term bonds when rates are higher, and shorter-term bonds when rates are lower. Only fools would be buying long-term bonds right now, IMHO.

Of course, this is also where the Fed manipulation comes into play. If not for the Fed keeping interest rates well below where they would be without the interference, returns would be much higher and asset prices would be less volatile, IMHO. Less volatile booms and busts are far more preferable for institutions like pension funds (and people who prefer investing based on fundamentals instead of trying to time the next bubble).

FWIW, if the pension funds had been in bonds all along, they wouldn’t have passed some of the pension enhancements (nor enacted the ridiculous pension contribution “holidays” when employers paid little to NOTHING in pension contributions) in the late 90s/early 2000s, which would have kept pension contributions at much more stable and sustainable levels.

[njtosd]

[quote=spdrun]

If the US is so vulgar, why are you here? I guess you must enjoy it.

Because I have family and some friends here, also live in NY City which has little in common with the rest of the US. Given another few years, unlikely that I’ll be spending more than 50% of my time here.

Also, I’m not in the economic position of the average American, but at the same time I have empathy. If I were in the position that the average American is in, I’d likely be in jail a long time ago for popping my boss in the nose.

And yes, I’m pretty content in working 25-30 hours per week avg, sometimes taking a month off, as a well-paid freelancer, sitting on some profitable rental property and not being as productive as I could be nor working to my potential. I wasn’t born smart to spend the rest of my life working like a dog, but rather follow the adage “work smarter, not harder.”[/quote]

First – Please tell me that you don’t think NY treats its citizens better than the US as a whole treats US citizens. You’re posts always seem a little crazy, but not crazy enough to believe that NY is a bastion of good government.

Second – you have probably been reading this website long enough to figure out that most people here are “not in the economic position of the average American.” I’m not really sure why you mention that. I’m also not sure why you’d mention that you have tendencies toward violence that you have a hard time resisting. But based on your own confessions, I think that the average American is probably better off when you’re on the Continent.

I never asked whether you were content – but since you’re content here in the land of vulgarity (some of which you can take credit for) it sounds like you are protesting a bit too much.

And finally, I cannot imagine an adage more trite than “work smarter, not harder.” It reminds me of the poster of the kitten suspended from a branch underneath which there is the caption “Hang in There, Baby.” Use your copious free time to come up with something a bit more insightful.

[spdrun]

(1) NYC is a bastion of good PEOPLE in many ways, nothing to do with good governance. Add to this that 40 or more per cent of the population is foreign-born, and it makes it an interesting and in many ways pleasant place to live.
(2) I exaggerate a bit, haven’t given anyone a nosebleed yet, but I’d really be pretty damn pissy if I had to deal with nonsense 50 hours a week, two weeks off per year, with nothing to show for it.
(3) Not really content, but I have family and friends here, so plan to spend at least some time i the Northeast for the forseeable future. If I had no connections, I would probably be in France or further East for keeps right now. Legally as a citizen of an EU country who speaks multiple languages, work permit or starting a business wouldn’t be a problem.
(4) Said Edison: “Genius is one percent inspiration and ninety-nine percent perspiration.”
Retorted Tesla: “If Edison had a needle to find in a haystack, he would proceed at once with the diligence of the bee to examine straw after straw until he found the object of his search. I was a sorry witness of such doings, knowing that a little theory and calculation would have saved him ninety percent of his labor.”

People who brag about working 50-60 hours a week non-stop may be seen as hard-working by the majority of the public. Unless they’re engaged in cutting-edge research, I just see them as sad cases… not worth bragging about. Work for the sake of work isn’t an end in itself.

[CA renter]

[quote=The-Shoveler]

Thing is who will want to buy Muni-bonds in the future ?

There is going to have to be much high interest to get people to buy Muni’s in the future especially if they take the whole hit me thinks.

I think this is where Stockton’s case is still interesting.

Buffett recently got out of the Muni-bond insurance biz by the way.[/quote]

Yes, interest rates will be higher…and, hopefully, money will be spent more wisely. There is a hell of a lot of pork in most govt spending, and the vast majority of that “excess spending” (the result of massive corruption, fraud, and abuse) has nothing at all to do with public unions.

[all]

[quote=spdrun]
(4) Said Edison: “Genius is one percent inspiration and ninety-nine percent perspiration.”
Retorted Tesla: “If Edison had a needle to find in a haystack, he would proceed at once with the diligence of the bee to examine straw after straw until he found the object of his search. I was a sorry witness of such doings, knowing that a little theory and calculation would have saved him ninety percent of his labor.”
[/quote]

The same Tesla that slept for two hours/day and lived in celibacy in order to remain focused on his work.

[spdrun]

That was also his choice — I think he was in it more for enjoyment than for money.

Work isn’t “work” in my book if it’s done for reasons other than necessity.

[CA renter]

Yet another good article about the failures of privatization. Some very informed and intelligent commenters have made some excellent points as well.

—————-

“Some of America’s leading news analysts are beginning to recognize the fallacy of the “free market.” Said Ted Koppel, “We are privatizing ourselves into one disaster after another.” Fareed Zakaria admitted, “I am a big fan of the free market…But precisely because it is so powerful, in places where it doesn’t work well, it can cause huge distortions.” They’re right. A little analysis reveals that privatization doesn’t seem to work in any of the areas vital to the American public.”

https://www.commondreams.org/view/2013/08/05

[livinincali]

[quote=CA renter]
Because of their long-term horizon, they’re able to get into long-term bonds. They have the flexibility to buy longer-term bonds when rates are higher, and shorter-term bonds when rates are lower. Only fools would be buying long-term bonds right now, IMHO.
[/quote]

I don’t think they have that much flexibility. In the past 5 years CalPRES has probably received about $25 billion in net contributions which makes up about 15-20% of their total portfolio. They obviously can’t have 20% of their portfolio tied up in short term bonds earning close to zero and also assume a 7.5% rate of return. They can’t just wait for better days if they assume 7.5% returns. They have to invest so they are investing out on the risk curve.

Remember the people making the decisions aren’t really worried about bad investment decisions because it’s somebody else’s money. You personally wouldn’t make that choice but they don’t care. Wouldn’t you rather have control over your money then a promise that somebody else is going to manage a pool of money so that you can get paid someday.

[quote=CA renter]
Of course, this is also where the Fed manipulation comes into play. If not for the Fed keeping interest rates well below where they would be without the interference, returns would be much higher and asset prices would be less volatile, IMHO. Less volatile booms and busts are far more preferable for institutions like pension funds (and people who prefer investing based on fundamentals instead of trying to time the next bubble).
[/quote]

The fed’s manipulation has actually been good for the total asset value calculation for CalPRES. Remember as rates go lower, older bonds with better yields go up in price. The 30 year bonds that CalPRES bought back in 2000 or 1990 are being held at values far greater than the face value on the bond. So when CalPRES says they have 150 billion in assets with maybe 50 billion in treasuries the face value of those treasuries might be 40 billion.

[The-Shoveler]

Kind of why I think all the Central banks are desperately inflating the markets in unison, they have no choice. They can’t afford another crash (at least or a while).

Can you imagine what a 50% decline in the market would do right now ?

What’s not tolerable will not be allowed to happen IMO.

[spdrun]

Fortunately, the markets don’t always follow the whim of the banksters; in fact, loose policy has been shown to actually increase volatility and the risk of a crash. Tell you what a 50% crash would do — make me throw a big damn party — biggest buying opportunity ever if “blood runneth in the streets” once again.

[Author]

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