Here are my longer form, weekend reading materials:

• Looting the Pension Funds (Rolling Stone) see also More on Delusional Pension Funds (Institutional Imperative)
• What Clayton Christensen Got Wrong (stratēchery)
• Have You Reaped The Rewards Of Rebalancing? (Servo) see also Asset Allocation for Muppets with a 401(k) (25IQ)
• How I failed Six lessons learned. by Tim O’Reilly (radar)
• How the NFL Fleeces Taxpayers (Atlantic)
We Shall Overwhelm: A new book explores when and why America’s rich protest (Prospect)
Seinfeld: The Parking Garage (Omni Reboot)
• Is the Brain the Key to Understanding Religion? (Standpoint)
• Ted Cruz: The Distinguished Wacko Bird from Texas (GQ) see also The Path to Dysfunction (Economix)
• An Argument With Instruments: On Charles Mingus (Nation)

What are you doing this weekend?


Q4 Seasonality: The Most Wonderful Time of the Year
Sector Performance
Source: Bespoke

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

19 Responses to “10 Weekend Reads”

  1. BusSchDean says:

    Critics of Social Security (and it does deserve some criticism, and certainly some watching) should have these two pension pieces as required reading. BTW, here is a direct link to the one by Lowenstein:

    If your readers are following the MLM/Herbalife/pyramid scheme story I will be on “Business Talk with Jim Campbell” tomorrow at 10:00am on Yale radio and syndicated stations

  2. rd says:

    My wife has been a teacher in an urban school district for the past decade so I have started paying a lot of attention to public pension funds and 403b policies. These things were never really a concern of mine before because I have always worked in the private sector with no pension funds and just 401ks/IRAs available. Some thoughts are below:

    1. I think many of the pension funds will go away over time for two reasons: to see the full benefits of them, you have to work in one organization for at least two decades and preferably 3 or 4 which dramatically reduces job and geographic mobility in an era with many two-income families; it is also clear that the funding and internal execution of pension funds is sadly lacking for a number of reasons so there is a major political risk regarding whether or not the cupboard will be bare 3 decades later.

    2. We live in NYS which has actually done a credible job funding and managing the pension funds. We pay high taxes, but at least the pension funds are decently funded compared to many other jurisdictions. Its not perfect, but on the whole appears to be in a fairly solvent position.

    3. School districts have done a pretty good job gettting their future pension costs under control. The early teachers had a pretty sweet pension deal but later tiers of employees have reasonable, but not outrageous pension programs. For most NYS teachers today, after 20 years, your pension will give you 40% of your last few years’ income and after 30 years it is 60% or more. The teachers pay into social security, so just pension and social security together should provide 70% to 100% of the last few years pay which makes for good income security. If somebody worked for 40 years and retired at 65, they would probably get over 100% to 125%.

    4. It is uncommon for teachers, but much more common in other sectors to have people suddenly promoted at the end of their career or work lots of overtime so that their pensions can be substantially more than what they made annually most of their career. I think a major public sector pension reform would be to base pensions on a formula related to lifetime earnings (obviously inflation adjusted) like social security but with less of its progressive nature and caps. This would be fairer to all the workers, the public and would probably solve many of the PR problems that many pension funds run into with exorbitant pensions for a handful of workers.

    5. Initially, my wife could open up a 403b pretty much anywhere, so we opened up an account directly with Vanguard. Suddenly, several years ago, that option went away and they had to enroll into 403b providers that were pre-selected by the school district. I looked through all of the providers’ literature, and virtually all of them had expensive mutual funds or variable annuities, usually with 1% account wrap fees on top. I did find one provider, ASP, that offered Vanguard funds as an option and had a pretty small wrap fee (0.15%?). When my wife and I went to the information fair where all the providers were available, ASP had one person stuck at a little table in the corner with no line in front of him. He didn’t have big glossy brochures to hand out. Many of the bigger name firms with expensive funds and big wrap fees had long lines in front of their tables. We signed up with the cheap guys and have been very happy to date. I would guess that most of the teachers and school administrators are probably paying 1.5% to 2.5% in mutual fund and wrap expenses to the financial firms for their 403bs.

    • RW says:

      One of the oldest and largest 403b providers, TIAA-CREF, also has a very reasonable fee schedule* but from your description it sounds like they weren’t part of the mix. Wonder why your wife’s district didn’t include them.

      *I have accounts at both TIAA-CREF and Vanguard.

    • DeDude says:

      I don’t understand why more Unions haven’t demanded that their members are part of the social security system and then get the rest of their pension benefits in 401K/403b plans. If the plans contain annuity type options then each member can decide for themselves if they want all their pensions to be the defined benefits type. Yes these plans have other vulnerabilities relative to the predators from Wall Street, but then Unions should be involved in informing their members about that. You wife’s Union should have mailed all members an information brochure about fees with a nice table showing all the options and what their total fees were.

      • 873450 says:

        Wall Street captured the public pension managers and union trustees. Sort of like mafia control over commercial trade unions representing teamsters, construction labor, dock workers, private waste haulers, etc. … except hardly anybody ever goes to jail.

      • rd says:

        Some additional recent readings on city pension woes:

        It is very clear that the past few decades has seen abysmal management of many public pension funds. The average benefits generally seem to be within reasonable ranges, but they would fefinitely need to be saved up for decades to make them work. It would require an annual contribution of $10k-$20k per worker to make it work. If they don’t come close to that, then their pension funds will have a gaping hole which is apparently what is happening in much of the country.

        I think the Baby Boomer generation will go down in history as one of the worst financial management generations of all time. In the end, it is why I like my 401ks – it takes discipline to take that money out of your paycheck every two weeks, but in the end that money and the company matches are yours and you are not subject to some clowns mismanagement of a big fund over which you have no control. Itonically, I am doing much of my retirement financial planning based around the 401k savings, looking at Social Security and my wife’s pension as actually having significant political risk because we save enough to see potential means testing ofr these “entitlements” down the road.

  3. theexpertisin says:

    Looting The Pension Funds.

    A prime example of looting a pension fund was the Teamster’s Union Central States Pension Fund fiasco that was little more than a conduit to union bosses’ bank accounts and mafia orchestrated Vegas construction and Nevada politician kickback schemes. This was in the early 1960′s, before pension safeguards were in place. Tens of thousands of workers lost everything they hoped to receive in retirement. Younger readers may want to look into this sordid chapter of union activities.

    The salaries and bennies of many union bosses today make the Hoffa Teamster’s Union boss compensation packages back in the day look paltry. They continue to fleece their sheep.

    • BusSchDean says:

      A quick look at history will show examples of governments, companies, and unions failing to fulfill their legal responsibilities to the people they claim to serve. Can we please can some increased transparency in all areas where financial misbehavior will be so tempting!

      • theexpertisin says:

        Good idea. Problem is, what political appointee is going to mind the store – and for what motive?

  4. DTouche says:

    It is nice to know other people are concerned about the Herbalife situation. From my vantage point the company appears to take the most from those that typically have the least.

    • BusSchDean says:

      During the show we discuss Herbalife and the MLM industry. Though a minuscule part of US retail sales, the direct selling/MLM industry has successfully resisted any form of anti-pryamid rule. MLMs found to be pyramid schemes have ripped off a large number of people in the US.

      Fraud and other bad behavior can happen in any industry. Yet, I know of no other industry where member companies – using a business model established more than sixty years ago – regularly and publicly have to keep justifying the legality of the model.

  5. RW says:

    From comments at Naked Capitalism. This is a long read if you follow the links but good background for BR’s WaPo article. There’s some stuff in there that I never imagined and not a little that makes me reflect yet again that however bad I thought this thing was, it was actually a lot worse.

    gordon says:
    September 21, 2013 at 3:12 am

    Um. I know there were a number of people who predicted the collapse of the US housing bubble. But to claim to have “seen it coming” (where “it” is the whole GFC), you would need to have also foreseen the effect that collapse had on bank credit. As we know, the suddenly valueless CDOs pushed many banks into a situation where they were technically insolvent. Hence TARP and all the rest as panicking Govts. tried to put the pieces back where they were.

    Who, exactly, predicted both parts of the story, and got the linkage right too?


    Yves Smith says:
    September 21, 2013 at 4:33 am

    Henry Maxey in April 2007. This is frigging amazing work, and this is by an equity markets guy, working at a UK money management boutique. In other words, not somebody with much of any access to the guys on fixed income desks who were cranking out CDOs:

    Gillian Tett was close, she saw the tremendous leverage and lack of equity in CDOs. The FT only lets you go 5 years back but in the early days of my blog, I was bad and took way more than what is fair use, but the upside is that I have really good archives from the period before the crisis started:

    If you just read the financial press in 2007 you could see it was gonna blow. I grabbed a few posts from early in that year: (FYI it took two years of chipping away and looking for experts for me to get decent info on the structures)


  6. Jojo says:

    Wow. Great gig if you could get it. Wonder how much that backpack thingy weighs?
    A Trip to the Galapagos Islands
    Sep 25, 2013 |

    Google Maps’ Street View team recently traveled to several locations in the Galapagos Islands, snapping panoramic views as they went. Using backpack-mounted cameras and underwater gear, they documented the unique diversity of the archipelago that helped inspire Darwin’s theory of evolution. The government of Ecuador established the Galapagos National Park in 1959, setting aside 97% of the islands’ land area for preservation. Collected here are images from Google’s team as well as from other photographers, taking you on a virtual visit to these amazing islands. [30 photos]

  7. ami_in_deutschland says:

    Totally mind blowing:

    I would also like to request that the height of blog posts be extended so that a larger sample of the content can be read. That would mean in the case of this post, that the entire list of items appears on separate rows with their links instead of jumbled together with commas between them. I find that I’m visiting the site less often than previously because it is more difficult to recognize when something is of interest or not.

    • You can do that yourself with “Command +” or “Command -”

      • ami_in_deutschland says:

        I’m not referring to the viewing of individual posts, but rather to the viewing of the sequence of latest posts on the start page. If it’s a question of limiting the download size of the start page to a reasonable amount, I would personally rather see a fewer number of most recent posts, but a little more of each of them. I often find myself not able to discern whether a post would interest me or not — there is generally little more than the title and a few text lines to go by — and then just not bother to click through.

        For your reading lists that would mean giving them enough room to still be displayed as bullet lists (with links!!). The current format makes it necessary to click through to the full post to get to the links.

        The same would be preferable for other post content as well. For longer text articles that would mean displaying more than just three or four lines, but rather the first few sentences to provide a taste of what is to come. I think your media posts (single videos or images) could also be similarly formatted so that clicking through wouldn’t be necessary.

        Of course I’m just a voice in the multitudes, but I’m presuming any feedback is welcome. Maybe other readers could offer their opinions?

  8. maddog2020 says:

    re: The rebalancing articles above:
    Since Jack Brennan from Vanguard is coming to The Big Picture conference, someone should ask him why they don’t offer an automatic rebalancing option, at least annually. (I won’t be there, so I can’t!)