Sunday, September 25, 2016

Pension Shortfalls Could Be 
4X To 7X Greater Than Reported
"In the immediate aftermath of the financial crisis, the Federal Reserve pushed interest rates to some of the lowest levels seen in history. And despite frequent claims that rates are about to be raised, rates have hardly increased in the last eight years. In Europe and Japan, they have moved even lower over the last year. What this creates is a toxic combination when it comes to Calpers, other public and private pension funds, and long term investing in general - including financial planning for retirement accounts. Many government bodies, including states, cities and school districts, are all making binding promises about decades of payments to public employees which are based upon relatively high investment yields generating much of the cash. Simultaneously, another part of government - the Federal Reserve - is massively intervening in the markets, and pushing yields to all-time lows. These federal policies have a potentially catastrophic impact on public finances on a nationwide basis, yet are being generally ignored with current pension shortfall estimates of state & local governments."
- Daniel R. Amerman, CFA
LINK HERE to the analysis

1 comment:

Anonymous said...


Naked Manipulation

Not doing so results in a “fail to deliver,” which DiIorio describes as the securities version of an IOU. And that IOU comes with rules: Under the SEC’s Regulation SHO, short sellers have to cough up the stock within one day of incurring the fail. Routine failures to deliver can lead to fines by the SEC, or even a ban from the securities markets.

Instead of complying with the rule, however, DiIorio alleges that Knight circumvented it by manipulating an obscure process within the machinery of the nation’s clearing system known as the “Obligation Warehouse.”

This service facilitates the matching of self-cleared trades (often known as “ex-clearing”) that don’t go through the DTC — for instance if the stock was chilled.

The Obligation Warehouse instead simply asks the buyer and seller of these ex-cleared trades if they “know” the transaction. If they both agree, the trade gets confirmed with a journal entry — and the buyer receives their stock purchase. It actually shows up in the buyer’s brokerage account.

The trades still have active IOUs, but according to DiIorio’s theory, buyers wouldn’t clamor for the trades to be closed because they would’ve already received their purchase.

If true, this would allow Knight to bury its naked short trades.

“They set up a shadow clearing system,” DiIorio said.

https://theintercept.com/2016/09/24/naked-shorts-cant-stay-naked-forever/