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Report Suggests Innovative Strategies For Public Pension Funding

Public pension funding could be in trouble due to the recession caused by the COVID-19 pandemic, which has put the squeeze on state and local governments. Now a new study on innovative funding strategies is offering ideas for managers during what could…

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public pension funding

Public pension funding could be in trouble due to the recession caused by the COVID-19 pandemic, which has put the squeeze on state and local governments. Now a new study on innovative funding strategies is offering ideas for managers during what could be a difficult time for public pensions.

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Dan Doonan and Tyler Bond of the National Institute on Retirement Security looked at a number of innovative and "lesser-known" pension funding strategies that have been used in the public sector to address legacy costs and create more stable costs over time.

Liability partitions as a public pension funding strategy

The first strategy involves developing separate funding strategies for legacy costs and ongoing plans. Doonan and Bond used Indiana's recovery strategy as an example for this strategy. Indiana was late to transition to prefunding, but the separation of the Teachers' Retirement Fund and the Public Employees' Retirement Fund before 2011 helped with this issue. Indiana now has a AAA credit rating from all three major ratings agencies, being one of just 13 states with that distinction. The state's public pensions are also well-funded compared to those of other states.

The funding strategy created a new tier for teachers hired after June 30, 1995. It used the same benefit formula as the other plan, but it created two funding strategies. One was for newly hired teachers, and the other was for those who would remain in the pay-go system that was previously enacted.

The new tier was prefunded from inception, so it created a fresh start for the pension system to move away from a funding strategy that was no longer working. Meanwhile, the plan continued to fund legacy costs on a pay-go basis. The pay-go tier is now only 25.7% funded, but it's no longer the main driver of the state's pension plans for teachers. Obligations in that tier are also reduced by benefit payments that have been made. The newer tier is well-funded, which wouldn't have happened without the partition between the old and new plans.

Utilizing side accounts

Donnan and Bond also looked at the use of side accounts to gain control over pension costs. The strategy addresses the problem that local governments have no control over their retirement systems, which are driven by decisions made at the state level.

Some statewide retirement systems have implemented side accounts to allow local governments more control over their plans. Side accounts enable governments to contribute more than the minimum amount into the plan and keep those extra contributions and the interest they earn to use as credits in future years.

This ensures that total contributions will always meet or exceed the minimum contributions even though the actual contribution for a particular year could be less than the required minimum contribution. Side accounts make sense because they allow governments to contribute more money when they have plenty of cash on hand in preparation for the lean times. Oregon, California, New York and Pennsylvania are some states that utilize side accounts.

Pension obligation bonds for funding

Doonan and Bond note that pension obligation bonds have been talked about quite a bit in the conversation about public pension funding. They explained that one of the benefits of these bonds is saving money over the long run, but there are other benefits, like having more clarity about the timing of costs. However, a big mistake can be made with pension bonds.

They point out that the term of pension bonds plays a major role in the likelihood that returns will exceed borrowing costs. Doonan and Bond note that stock market returns over five or 10 years are highly volatile and may be in the negative, but returns over 20 or 30 years are less volatile and always positive.

They explain that longer-term pension bonds reduce the chance that the equity risk premium will be lost due to poor timing. To add timing diversification, thus reducing this risk even further, Doonan and Bond suggest issuing a series of smaller pension bonds over years rather than in a large one-time issuance. Another strategy is to invest the proceeds from a larger bond issuance over several years instead of all at once.

Contribution collars and withdrawal liability

Doonan and Bond also looked at Maine's Public Employee Retirement System, which made several changes in recent years. One of the concerns was that local governments could leave the pension plan without paying for their portion of unfunded liabilities, which could cause problems for sustainability. Legal protections for workers were also much weaker than those in other states.

The two public pension funding reforms Doonan and Bond focused on were the addition of a withdrawal liability policy and changes to how contributions are set in the future. The state legislature required local governments to make withdrawal liability payments if they decide to leave the pension system.

The reforms also set contribution floors and limits for employees and local governments participating in the pension plans.

Dedicated revenues for public pension funding

Finally, Doonan and Bond discussed the practice of dedicating certain revenue to states' pension plans to strengthen them. They said the feasibility of dedicating revenues will vary from state to state, but it is worth investigating for jurisdictions that have severe challenges in public pension funding.

They point out that a number of cities and states have dedicated revenue from certain types of legalized betting and gambling to fund their pension contributions. For example, Kentucky House Bill 137 introduced this year in the state legislature would legalize sports betting and dedicate 95% of the revenues to paying down the state's unfunded pension liabilities. The bill wasn't passed during the 2020 session, but it may be introduced again because several lawmakers and the governor have indicated support for using sports betting revenue to fund pension contributions.

Oregon Senate Bill 1049 dedicated sports betting revenue to fund contributions to the Oregon Public Employees Retirement System. Illinois also passed a bill that would allow more casinos and legalize sports betting. Several other states have also dedicated certain revenues to pension contributions.

Doonan and Bond note that most public pension plans are well-funded and sustainable, but some are up against very serious funding challenges. Next year could bring problems for all public pension funds due to unprecedented tax revenue shortfalls by state and local governments. Thus, now seems like a good time to review some potential changes to public pension funding strategies. To read more on these public pension funding strategies, you can check out the full study here.

The post Report Suggests Innovative Strategies For Public Pension Funding appeared first on ValueWalk.

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Home buyers must now navigate higher mortgage rates and prices

Rates under 4% came and went during the Covid pandemic, but home prices soared. Here’s what buyers and sellers face as the housing season ramps up.

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Springtime is spreading across the country. You can see it as daffodil, camellia, tulip and other blossoms start to emerge. 

You can also see it in the increasing number of for sale signs popping up in front of homes, along with the painting, gardening and general sprucing up as buyers get ready to sell. 

Which leads to two questions: 

  • How is the real estate market this spring? 
  • Where are mortgage rates? 

What buyers and sellers face

The housing market is bedeviled with supply shortages, high prices and slow sales.

Mortgage rates are still high and may limit what a buyer can offer and a seller can expect.  

Related: Analyst warns that a TikTok ban could lead to major trouble for Apple, Big Tech

And there's a factor not expected that may affect the sales process. Fixed commission rates on home sales are going away in July.

Reports this week and in a week will make the situation clearer for buyers and sellers. 

The reports are:

  • Housing starts from the U.S. Commerce Department due Tuesday. The consensus estimate is for a seasonally adjusted rate of about 1.4 million homes. These would include apartments, both rentals and condominiums. 
  • Existing home sales, due Thursday from the National Association of Realtors. The consensus estimate is for a seasonally adjusted sales rate of about 4 million homes. In 2023, some 4.1 million homes were sold, the worst sales rate since 1995. 
  • New-home sales and prices, due Monday from the Commerce Department. Analysts are expecting a sales rate of 661,000 homes (including condos), up 1.5% from a year ago.

Here is what buyers and sellers need to know about the situation. 

Mortgage rates will stay above 5% 

That's what most analysts believe. Right now, the rate on a 30-year mortgage is between 6.7% and 7%. 

Rates peaked at 8% in October after the Federal Reserve signaled it was done raising interest rates.

The Freddie Mac Primary Mortgage Market Survey of March 14 was at 6.74%. 

Freddie Mac buys mortgages from lenders and sells securities to investors. The effect is to replenish lenders' cash levels to make more loans. 

A hotter-than-expected Producer Price Index released that day has pushed quotes to 7% or higher, according to data from Mortgage News Daily, which tracks mortgage markets.

Home buyers must navigate higher mortgage rates and prices this spring.

TheStreet

On a median-priced home (price: $380,000) and a 20% down payment, that means a principal and interest rate payment of $2,022. The payment  does not include taxes and insurance.

Last fall when the 30-year rate hit 8%, the payment would have been $2,230. 

In 2021, the average rate was 2.96%, which translated into a payment of $1,275. 

Short of a depression, that's a rate that won't happen in most of our lifetimes. 

Most economists believe current rates will fall to around 6.3% by the end of the year, maybe lower, depending on how many times the Federal Reserve cuts rates this year. 

If 6%, the payment on our median-priced home is $1,823.

But under 5%, absent a nasty recession, fuhgettaboutit.

Supply will be tight, keeping prices up

Two factors are affecting the supply of homes for sale in just about every market.

First: Homeowners who had been able to land a mortgage at 2.96% are very reluctant to sell because they would then have to find a home they could afford with, probably, a higher-cost mortgage.

More economic news:

Second, the combination of high prices and high mortgage rates are freezing out thousands of potential buyers, especially those looking for homes in lower price ranges.

Indeed, The Wall Street Journal noted that online brokerage Redfin said only about 20% of homes for sale in February were affordable for the typical household.

And here mortgage rates can play one last nasty trick. If rates fall, that means a buyer can afford to pay more. Sellers and their real-estate agents know this too, and may ask for a higher price. 

Covid's last laugh: An inflation surge

Mortgage rates jumped to 8% or higher because since 2022 the Federal Reserve has been fighting to knock inflation down to 2% a year. Raising interest rates was the ammunition to battle rising prices.

In June 2022, the consumer price index was 9.1% higher than a year earlier. 

The causes of the worst inflation since the 1970s were: 

  • Covid-19 pandemic, which caused the global economy to shut down in 2020. When Covid ebbed and people got back to living their lives, getting global supply chains back to normal operation proved difficult. 
  • Oil prices jumped to record levels because of the recovery from the pandemic recovery and Russia's invasion of Ukraine.

What the changes in commissions means

The long-standing practice of paying real-estate agents will be retired this summer, after the National Association of Realtors settled a long and bitter legal fight.

No longer will the seller necessarily pay 6% of the sale price to split between buyer and seller agents.

Both sellers and buyers will have to negotiate separately the services agents have charged for 100 years or more. These include pre-screening properties, writing sales contracts, and the like. The change will continue a trend of adding costs and complications to the process of buying or selling a home.

Already, interest rates are a complication. In addition, homeowners insurance has become very pricey, especially in communities vulnerable to hurricanes, tornadoes, and forest fires. Florida homeowners have seen premiums jump more than 102% in the last three years. A policy now costs three times more than the national average.

Related: Veteran fund manager picks favorite stocks for 2024

 

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Mistakes Were Made

Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that…

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Mistakes Were Made

Authored by C.J.Hopkins via The Consent Factory,

Make fun of the Germans all you want, and I’ve certainly done that a bit during these past few years, but, if there’s one thing they’re exceptionally good at, it’s taking responsibility for their mistakes. Seriously, when it comes to acknowledging one’s mistakes, and not rationalizing, or minimizing, or attempting to deny them, and any discomfort they may have allegedly caused, no one does it quite like the Germans.

Take this Covid mess, for example. Just last week, the German authorities confessed that they made a few minor mistakes during their management of the “Covid pandemic.” According to Karl Lauterbach, the Minister of Health, “we were sometimes too strict with the children and probably started easing the restrictions a little too late.” Horst Seehofer, the former Interior Minister, admitted that he would no longer agree to some of the Covid restrictions today, for example, nationwide nighttime curfews. “One must be very careful with calls for compulsory vaccination,” he added. Helge Braun, Head of the Chancellery and Minister for Special Affairs under Merkel, agreed that there had been “misjudgments,” for example, “overestimating the effectiveness of the vaccines.”

This display of the German authorities’ unwavering commitment to transparency and honesty, and the principle of personal honor that guides the German authorities in all their affairs, and that is deeply ingrained in the German character, was published in a piece called “The Divisive Virus” in Der Spiegel, and immediately widely disseminated by the rest of the German state and corporate media in a totally organic manner which did not in any way resemble one enormous Goebbelsian keyboard instrument pumping out official propaganda in perfect synchronization, or anything creepy and fascistic like that.

Germany, after all, is “an extremely democratic state,” with freedom of speech and the press and all that, not some kind of totalitarian country where the masses are inundated with official propaganda and critics of the government are dragged into criminal court and prosecuted on trumped-up “hate crime” charges.

OK, sure, in a non-democratic totalitarian system, such public “admissions of mistakes” — and the synchronized dissemination thereof by the media — would just be a part of the process of whitewashing the authorities’ fascistic behavior during some particularly totalitarian phase of transforming society into whatever totalitarian dystopia they were trying to transform it into (for example, a three-year-long “state of emergency,” which they declared to keep the masses terrorized and cooperative while they stripped them of their democratic rights, i.e., the ones they hadn’t already stripped them of, and conditioned them to mindlessly follow orders, and robotically repeat nonsensical official slogans, and vent their impotent hatred and fear at the new “Untermenschen” or “counter-revolutionaries”), but that is obviously not the case here.

No, this is definitely not the German authorities staging a public “accountability” spectacle in order to memory-hole what happened during 2020-2023 and enshrine the official narrative in history. There’s going to be a formal “Inquiry Commission” — conducted by the same German authorities that managed the “crisis” — which will get to the bottom of all the regrettable but completely understandable “mistakes” that were made in the heat of the heroic battle against The Divisive Virus!

OK, calm down, all you “conspiracy theorists,” “Covid deniers,” and “anti-vaxxers.” This isn’t going to be like the Nuremberg Trials. No one is going to get taken out and hanged. It’s about identifying and acknowledging mistakes, and learning from them, so that the authorities can manage everything better during the next “pandemic,” or “climate emergency,” or “terrorist attack,” or “insurrection,” or whatever.

For example, the Inquiry Commission will want to look into how the government accidentally declared a Nationwide State of Pandemic Emergency and revised the Infection Protection Act, suspending the German constitution and granting the government the power to rule by decree, on account of a respiratory virus that clearly posed no threat to society at large, and then unleashed police goon squads on the thousands of people who gathered outside the Reichstag to protest the revocation of their constitutional rights.

Once they do, I’m sure they’ll find that that “mistake” bears absolutely no resemblance to the Enabling Act of 1933, which suspended the German constitution and granted the government the power to rule by decree, after the Nazis declared a nationwide “state of emergency.”

Another thing the Commission will probably want to look into is how the German authorities accidentally banned any further demonstrations against their arbitrary decrees, and ordered the police to brutalize anyone participating in such “illegal demonstrations.”

And, while the Commission is inquiring into the possibly slightly inappropriate behavior of their law enforcement officials, they might want to also take a look at the behavior of their unofficial goon squads, like Antifa, which they accidentally encouraged to attack the “anti-vaxxers,” the “Covid deniers,” and anyone brandishing a copy of the German constitution.

Come to think of it, the Inquiry Commission might also want to look into how the German authorities, and the overwhelming majority of the state and corporate media, accidentally systematically fomented mass hatred of anyone who dared to question the government’s arbitrary and nonsensical decrees or who refused to submit to “vaccination,” and publicly demonized us as “Corona deniers,” “conspiracy theorists,” “anti-vaxxers,” “far-right anti-Semites,” etc., to the point where mainstream German celebrities like Sarah Bosetti were literally describing us as the inessential “appendix” in the body of the nation, quoting an infamous Nazi almost verbatim.

And then there’s the whole “vaccination” business. The Commission will certainly want to inquire into that. They will probably want to start their inquiry with Karl Lauterbach, and determine exactly how he accidentally lied to the public, over and over, and over again …

And whipped people up into a mass hysteria over “KILLER VARIANTS” …

And “LONG COVID BRAIN ATTACKS” …

And how “THE UNVACCINATED ARE HOLDING THE WHOLE COUNTRY HOSTAGE, SO WE NEED TO FORCIBLY VACCINATE EVERYONE!”

And so on. I could go on with this all day, but it will be much easier to just refer you, and the Commission, to this documentary film by Aya Velázquez. Non-German readers may want to skip to the second half, unless they’re interested in the German “Corona Expert Council” …

Look, the point is, everybody makes “mistakes,” especially during a “state of emergency,” or a war, or some other type of global “crisis.” At least we can always count on the Germans to step up and take responsibility for theirs, and not claim that they didn’t know what was happening, or that they were “just following orders,” or that “the science changed.”

Plus, all this Covid stuff is ancient history, and, as Olaf, an editor at Der Spiegel, reminds us, it’s time to put the “The Divisive Pandemic” behind us …

… and click heels, and heil the New Normal Democracy!

Tyler Durden Sat, 03/16/2024 - 23:20

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Harvard Medical School Professor Was Fired Over Not Getting COVID Vaccine

Harvard Medical School Professor Was Fired Over Not Getting COVID Vaccine

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A…

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Harvard Medical School Professor Was Fired Over Not Getting COVID Vaccine

Authored by Zachary Stieber via The Epoch Times (emphasis ours),

A Harvard Medical School professor who refused to get a COVID-19 vaccine has been terminated, according to documents reviewed by The Epoch Times.

Martin Kulldorff, epidemiologist and statistician, at his home in Ashford, Conn., on Feb. 11, 2022. (Samira Bouaou/The Epoch Times)

Martin Kulldorff, an epidemiologist, was fired by Mass General Brigham in November 2021 over noncompliance with the hospital’s COVID-19 vaccine mandate after his requests for exemptions from the mandate were denied, according to one document. Mr. Kulldorff was also placed on leave by Harvard Medical School (HMS) because his appointment as professor of medicine there “depends upon” holding a position at the hospital, another document stated.

Mr. Kulldorff asked HMS in late 2023 how he could return to his position and was told he was being fired.

You would need to hold an eligible appointment with a Harvard-affiliated institution for your HMS academic appointment to continue,” Dr. Grace Huang, dean for faculty affairs, told the epidemiologist and biostatistician.

She said the lack of an appointment, combined with college rules that cap leaves of absence at two years, meant he was being terminated.

Mr. Kulldorff disclosed the firing for the first time this month.

“While I can’t comment on the specifics due to employment confidentiality protections that preclude us from doing so, I can confirm that his employment agreement was terminated November 10, 2021,” a spokesperson for Brigham and Women’s Hospital told The Epoch Times via email.

Mass General Brigham granted just 234 exemption requests out of 2,402 received, according to court filings in an ongoing case that alleges discrimination.

The hospital said previously, “We received a number of exemption requests, and each request was carefully considered by a knowledgeable team of reviewers.

A lot of other people received exemptions, but I did not,” Mr. Kulldorff told The Epoch Times.

Mr. Kulldorff was originally hired by HMS but switched departments in 2015 to work at the Department of Medicine at Brigham and Women’s Hospital, which is part of Mass General Brigham and affiliated with HMS.

Harvard Medical School has affiliation agreements with several Boston hospitals which it neither owns nor operationally controls,” an HMS spokesperson told The Epoch Times in an email. “Hospital-based faculty, such as Mr. Kulldorff, are employed by one of the affiliates, not by HMS, and require an active hospital appointment to maintain an academic appointment at Harvard Medical School.”

HMS confirmed that some faculty, who are tenured or on the tenure track, do not require hospital appointments.

Natural Immunity

Before the COVID-19 vaccines became available, Mr. Kulldorff contracted COVID-19. He was hospitalized but eventually recovered.

That gave him a form of protection known as natural immunity. According to a number of studies, including papers from the U.S. Centers for Disease Control and Prevention, natural immunity is better than the protection bestowed by vaccines.

Other studies have found that people with natural immunity face a higher risk of problems after vaccination.

Mr. Kulldorff expressed his concerns about receiving a vaccine in his request for a medical exemption, pointing out a lack of data for vaccinating people who suffer from the same issue he does.

I already had superior infection-acquired immunity; and it was risky to vaccinate me without proper efficacy and safety studies on patients with my type of immune deficiency,” Mr. Kulldorff wrote in an essay.

In his request for a religious exemption, he highlighted an Israel study that was among the first to compare protection after infection to protection after vaccination. Researchers found that the vaccinated had less protection than the naturally immune.

“Having had COVID disease, I have stronger longer lasting immunity than those vaccinated (Gazit et al). Lacking scientific rationale, vaccine mandates are religious dogma, and I request a religious exemption from COVID vaccination,” he wrote.

Both requests were denied.

Mr. Kulldorff is still unvaccinated.

“I had COVID. I had it badly. So I have infection-acquired immunity. So I don’t need the vaccine,” he told The Epoch Times.

Dissenting Voice

Mr. Kulldorff has been a prominent dissenting voice during the COVID-19 pandemic, countering messaging from the government and many doctors that the COVID-19 vaccines were needed, regardless of prior infection.

He spoke out in an op-ed in April 2021, for instance, against requiring people to provide proof of vaccination to attend shows, go to school, and visit restaurants.

The idea that everybody needs to be vaccinated is as scientifically baseless as the idea that nobody does. Covid vaccines are essential for older, high-risk people and their caretakers and advisable for many others. But those who’ve been infected are already immune,” he wrote at the time.

Mr. Kulldorff later co-authored the Great Barrington Declaration, which called for focused protection of people at high risk while removing restrictions for younger, healthy people.

Harsh restrictions such as school closures “will cause irreparable damage” if not lifted, the declaration stated.

The declaration drew criticism from Dr. Anthony Fauci, head of the National Institute of Allergy and Infectious Diseases, and Dr. Rochelle Walensky, who became the head of the CDC, among others.

In a competing document, Dr. Walensky and others said that “relying upon immunity from natural infections for COVID-19 is flawed” and that “uncontrolled transmission in younger people risks significant morbidity(3) and mortality across the whole population.”

“Those who are pushing these vaccine mandates and vaccine passports—vaccine fanatics, I would call them—to me they have done much more damage during this one year than the anti-vaxxers have done in two decades,” Mr. Kulldorff later said in an EpochTV interview. “I would even say that these vaccine fanatics, they are the biggest anti-vaxxers that we have right now. They’re doing so much more damage to vaccine confidence than anybody else.

Surveys indicate that people have less trust now in the CDC and other health institutions than before the pandemic, and data from the CDC and elsewhere show that fewer people are receiving the new COVID-19 vaccines and other shots.

Support

The disclosure that Mr. Kulldorff was fired drew criticism of Harvard and support for Mr. Kulldorff.

The termination “is a massive and incomprehensible injustice,” Dr. Aaron Kheriaty, an ethics expert who was fired from the University of California–Irvine School of Medicine for not getting a COVID-19 vaccine because he had natural immunity, said on X.

The academy is full of people who declined vaccines—mostly with dubious exemptions—and yet Harvard fires the one professor who happens to speak out against government policies.” Dr. Vinay Prasad, an epidemiologist at the University of California–San Francisco, wrote in a blog post. “It looks like Harvard has weaponized its policies and selectively enforces them.”

A petition to reinstate Mr. Kulldorff has garnered more than 1,800 signatures.

Some other doctors said the decision to let Mr. Kulldorff go was correct.

“Actions have consequence,” Dr. Alastair McAlpine, a Canadian doctor, wrote on X. He said Mr. Kulldorff had “publicly undermine[d] public health.”

Tyler Durden Sat, 03/16/2024 - 21:00

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