Smart Ticker

Will Rising Union Activism Expose The Zombified US Pensions

2012-12-26T21:30:35Z

Over the last few years, and at an increasing pace as of more recently, unions have become more and more confident of their ability to effect change and taken much more aggressive activist positions against the capitalist oppressors. The most recent examples range from California cities to Twinkies-maker Hostess Brands, and each time the stance from the unions appears to have been far more aggressive (and M.A.D. prone) than in the past. The question is why? Perhaps, as we tweeted following Hostess’ liquidation:

zerohedge @zerohedge

Will the broke PBGC step in and fund Hostess’ 18,000 workers suddenly vaporized pensions?

...It is the confidence of an all-powerful government at their back with the US Pension Benefit Guarantee Corporation, which is the backstop for private sector plans, providing cover. The problem is, as UBS explains, the PBGC has a huge deficit and is cashflow negative. This leads us to the uncomfortable expectation of further USD government support (bailout) or a more direct monetization by the Fed. PBGC could be impacted severely if a few large firms terminate their pensions. In this case, UBS expects PBGC to sell equities and buy long duration fixed income.

more…

http://www.zerohedge.com/news/2012-12-26/will-rising-union-activism-expose-zombified-us-pensions

Netflix Hit by Outage, Blames Amazon

2012-12-26T21:24:33Z

Netflix Inc. restored streaming video services on Christmas morning, a day after an outage triggered by technical problems at Web service provider Amazon.com Inc. stretched across the Americas, the Wall Street Journal reports. ZD Net and PC World bloggers say the scale of the failure needs to be taken into consideration when businesses transition more real-time business applications to the cloud.

Qualified Account Amounts For 2013

2012-12-26T20:51:23Z

Maximum Contributions for 2013 in qualified accounts.

These types of accounts are very important because they can help lower some of your taxes. They also compound at a much faster rate then regular accounts because you are now compounding with no taxes. Below is an illustration of the power of compounding with no taxes. As you can see after 10 yrs, the IRA account is $72K vs. $65K (11% difference) Non-IRA. After 15 years the IRA account is $135K vs $114K (18% difference). And after 20 years, the IRA account is $228K vs $179K (27% difference).

http://www.retirementleaf.com/qualified-account-amounts-for-2013

As Hugo Chavez Wins Presidential Re-election Someone Makes Absolute Killing On InTrade

2012-10-08T13:44:49Z

Moments ago the Venezuelan Electoral Council (one wonders if the term ‘Hanging Chad’ has a different meaning down there?), announced that with 90% of the votes counted, and an 80.4% turnout, the winner of 54.4% of the vote, and still reigning presidential champion, is Venezuela’s Hugo Chaved. This is not surprising. What is quite stunning however, is that someone made an absolute killing in the Chavez reelection contract, which after trading in the 80s range (indicating an 80% probability of reelection), dipped moments ago to the low 20s, following speculation Chavez may be on the way out, only to soar to 99.9 as of the last trade. In other words, someone just made 5x their money on the Chavez vote in minutes, money which has most likely been well spent on Cuban Cohibas by now. Congrats.

http://www.zerohedge.com/news/2012-10-07/hugo-chavez-wins-presidential-re-election-someone-makes-absolute-killing-intrade

Critics assail SEC proposal on Reg D advertising

2012-10-08T13:38:27Z

An SEC proposal to end advertising restrictions on private placements has come under fire from critics who say that the commission must either yank the controversial plan or risk a lawsuit.
Related to this story »

The proposed rule would allow issuers of private securities sold under Securities and Exchange Commission Rule 506 of Regulation D to solicit investors publicly. The current rule, widely used by hedge funds, lets issuers raise unlimited amounts of money from accredited investors, but it doesn’t permit general solicitation or advertising.

State regulators and investor advocates are concerned that the SEC proposal doesn’t specify procedures to verify that investors are accredited — which the SEC defines as having a net worth of $1 million or more, excluding the value of a primary residence — and instead simply requires that issuers have a “reasonable basis” for believing investors are accredited.

The SEC is skating on thin ice by not setting clear verification standards and refusing to consider further steps to protect investors from potentially risky private placements, its critics contend.

“A rule adopted pursuant to this proposing release would be highly vulnerable to legal challenge,” Barbara Roper, director of investor protection at the Consumer Federation of America, wrote in a comment letter last week.

The comment period for the proposed rule, which was mandated under the Jumpstart Our Business Startups Act, ended last Friday.

“The commission has in recent years proven to be extremely vulnerable to legal challenge based on the claim that it has not conducted an adequate economic analysis to justify its proposed regulatory approach,” Ms. Roper wrote. “And yet the so-called economic analysis accompanying this rule makes no pretense of [evaluating] the relative benefits and costs of the proposed action and the main alternatives.”

She cited the key legal case on the cost-benefit issue, a 2011 decision by the U.S. Court of Appeals for the D.C. Circuit. The case has been widely cited by industry interests in attempts to stop various SEC rule makings.

“The commission has made no effort to satisfy legal or internal SEC standards,” Mercer Bullard, founder of Fund Democracy Inc., wrote in a comment letter.

Both the CFA and Fund Democracy told the SEC that it must withdraw the proposal and issue a revised version that includes an economic analysis and consideration of alternative regulatory approaches — or else face possible legal action.

“We’re hoping [the SEC will] see the light and re-propose” the rule, Ms. Roper wrote in an e-mail.

“There will never be a stronger case for an investor challenge on cost-benefit grounds, so it is possible that a well-funded public-interest group would take the case,” Mr. Bullard wrote in an e-mail.

State regulators, meanwhile, told the SEC that issuers who use newfound powers to pitch their deals publicly might themselves face legal risks.

The lack of specific guidance on verification procedures “will lead to serious consequences — namely, litigation,” Heath Abshure, Arkansas’ securities commissioner and president of the North American Securities Administrators Association Inc., wrote in a comment letter.

“In the absence of clarity in the rules, each state regulator will have to make an independent determination whether an issuer has taken reasonable steps to verify” an investor’s status, he wrote.

“The likely result is not only costly litigation but inconsistent [court] interpretations,” Mr. Abshure wrote.

NASAA asked the SEC to “reconsider its course” and adopt a rule with specific verification procedures using financial records such as tax returns.

Prior to proposing the rule and asking for comment in August, the SEC had planned to approve an interim rule that would have removed the ad prohibitions immediately.

But the SEC backtracked from that idea after state regulators, investor advocates and the Investment Company Institute demanded that they be given an opportunity to see the proposal and comment.

On the other side of the controversy, hedge funds and other issuers who support the SEC’s proposal say that it is time to ditch the prohibition.

Ending the 30-year old ban on general solicitation “will reduce legal uncertainty, facilitate capital formation and increase transparency of the hedge fund industry,” the Managed Funds Association wrote in a comment letter.

The proposed rule “would also comply with the SEC’s obligations when conducting a rule making to consider costs and benefits,” the MFA added, arguing that the prohibition is costly and inefficient for both regulators and the fund industry.

MFA spokesman Steve Hinkson declined to comment further, as did SEC spokesman John Nester.

“I have to give the SEC credit where credit is due. The proposed rule is consistent with Congress’ intent and is also what legitimate private issuers already do,” Phillip Goldstein, a hedge fund manager with Bulldog Investors, wrote in a comment letter.
TRYING TO UNDO JOBS ACT?

Mr. Goldstein said in an interview that the SEC’s critics are “really just fighting against the JOBS Act all over again” after losing the debate in Congress.

In 2007, Massachusetts securities regulators charged him with violating the ad ban. Mr. Goldstein unsuccessfully challenged the action on free-speech grounds and appealed the case to the Supreme Court, which this year declined to hear it.

The JOBS Act has now made his case moot, he said, and he is asking Massachusetts regulators to vacate the action.

http://www.investmentnews.com/article/20121007/REG/310079982

Guest Post: Explaining Hyperinflation

2012-10-08T00:40:27Z

This is a post in three sections. First I want to outline my conception of the price level phenomena inflation and deflation. Second, I want to outline my conception of the specific inflationary case of hyperinflation. And third, I want to consider the predictive implications of this.
Inflation & Deflation

What is inflation? There is a vast debate on the matter. Neoclassicists and Keynesians tend to define inflation as a rise in the general level of prices of goods and services in an economy over a period of time.

Prices are reached by voluntary agreement between individuals engaged in exchange. Every transaction is unique, because the circumstance of each transaction is unique. Humans choose to engage in exchange based on the desire to fulfil their own subjective needs and wants. Each individual’s supply of, and demand for goods is different, and continuously changing based on their continuously varying circumstances. This means that the measured phenomena of price level changes are ripples on the pond of human needs and wants. Nonetheless price levels convey extremely significant information — the level at which individuals are prepared to exchange the goods in question. When price levels change, it conveys that the underlying economic fundamentals encoded in human action have changed.

Economists today generally measure inflation in terms of price indices, consisting of the measured price of levels of various goods throughout the economy. Price indices are useful, but as I have demonstrated before they can often leave out important avenues like housing or equities. Any price index that does not take into account prices across the entire economy is not representing the fuller price structure.

Austrians tend to define inflation as any growth in the money supply. This is a useful measure too, but money supply growth tells us about money supply growth; it does not relate that growth in money supply to underlying productivity (or indeed to price level, which is what price indices purport and often fail to do). Each transaction is two-way, meaning that two goods are exchanged. Money is merely one of two goods involved in a transaction. If the money supply increases, but the level of productivity (and thus, supply) increases faster than the money supply, this would place a downward pressure on prices. This effect is visible in many sectors today — for instance in housing where a glut in supply has kept prices lower than their pre-2008 peak, even in spite of huge money supply growth.

So my definition of inflation is a little different to current schools. I define inflation (and deflation) as growth (or shrinkage) in the money supply disproportionate to the economy’s productivity. If money grows faster than productivity, there is inflation. If productivity grows faster than money there is deflation. If money shrinks faster than productivity, there is deflation. If productivity shrinks faster than money, there is inflation.

This is given by the following equation where R is relative inflation, ?Q is change in productivity, and ?M is change in the money supply:

R= ?M-?Q

This chart shows relative inflation over the past fifty years. I am using M2 to denote the money supply, and GDP to denote productivity (GDP and M2 are imperfect estimations of both the true money supply, and the true level of productivity. It is possible to use MZM
for the money supply and industrial output for productivity to produce different estimates of the true level of relative inflation):

full article.

http://www.zerohedge.com/news/2012-10-04/guest-post-explaining-hyperinflation

How Bad Is Bain?

2012-09-10T04:21:43Z

Unbeknownst to most observers of the 2012 presidential race, there is one American private-equity firm that doesn’t quite fit the stereotype. Sure, it buys and sells companies for fun and profit, but this firm is not defined by corporate swashbucklers in bespoke suits. Many of the people it hires are Dockers-wearing number-crunchers, geeks rather than Gekkos. Several top executives are Obama megadonors.

The firm’s name? Bain Capital.

Last week, continuing a campaign theme, the firm starred as the anti-hero at the Democratic National Convention, where former employees of Bain-owned companies testified to its heartless-robber-baron ways. But within the private-equity industry itself, the operation that Mitt Romney helped start has long been viewed as pretty tame. A staffer at a rival firm puts it this way: “If you had to pick a P.E. firm to be the evil one, it wouldn’t be Bain.”

True, Bain is no saint—it has conducted all the layoffs, tax-avoidance schemes, and noxious dividend recaps you’ve read about. It’s been especially aggressive in seeking the fee waivers currently under investigation by New York attorney general Eric Schneiderman, which allow its executives to dodge higher tax rates by repackaging management fees as capital gains. But overall, Bain lies outside the dark heart of private equity. Having its headquarters in Boston puts it off the Manhattan private-equity power grid. And it’s no longer a member of the Private Equity Growth Capital Council, the industry’s spin-happy lobbying group.

But the biggest difference might be its internal culture. Because many of its recruits come from Bain & Company, the consulting firm from which it spawned, its staff trends more wonk than bro. “Bain guys tend to be the smart kids that did really well in school, but maybe their clothes don’t fit exactly right,” says a former employee.

Another thing you’ll find at Bain: Democrats. One of the firm’s top executives is Steve Pagliuca, a prominent Obama fund-raiser and onetime Democratic Senate candidate. Another firm higher-up, Josh Bekenstein, has also supported the president. “Bain’s political leaning is far more split than almost any other firm I know,” the former Bain employee says. According to the Center for Responsive Politics, 42 percent of the candidate and party contributions made by Bain employees this election cycle have gone to Democrats.

If you want a better candidate for private-equity arch–bad guy, you might go with the Blackstone Group, whose CEO Steve Schwarzman once compared Obama’s tax plans to Hitler’s invasion of Poland. Kohlberg Kravis Roberts, which was co-founded by Republican Henry Kravis and took part in the largest and potentially worst buyout in history (a $45 billion acquisition of Texas energy company TXU, which is now saddled with debt and gasping for air), would also have fit the bill. It sounds damning that the Bain-controlled office-product-maker Ampad laid off several hundred employees. But after KKR took over a company called First Data, the company cut at least 1,700 workers.

“Bain’s track record isn’t bad, relatively speaking,” the private-equity worker says. But it does have one thing going against it on the PR front, which is that the guy who started the firm is running for president.

http://nymag.com/news/intelligencer/bain-capital-2012-9/

WHo KiLLeD THe FaCeBooK IPO?

2012-09-10T04:16:22Z

WHO KILLED THE FACEBOOK IPO?
(Who Killed Davey Moore, Bob Dylan)
WilliamBanzai7

Who killed the Facebook IPO
Why an’ what’s the reason for?

“Not I,” says the SEC porn addict,
“Don’t point your finger at me.
I could’ve delayed the launch date
An’ maybe kept small investors from this hapless fate,
But the insider crowd would’ve booed, we’re sure,
At not gettin’ their money sooner,
It’s too bad it had to go fast,
But there was a pressure on us too, you know.
It wasn’t us that made it fail.
No, you can’t blame us at all.”