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California Teachers’ Pension Fund Mulls Commodity Investment
Feb. 4 (Bloomberg) -- The California State Teachers’ Retirement System, the second-biggest U.S. public pension, is considering investments in commodities to boost returns and provide a hedge against inflation and slumping equities.
Did they like commodities at lower prices? No.
Commodity prices have surged since 2001 as global economic growth led by China, the fastest-growing consumer of raw materials, spurred demand for metals, energy and grains. Copper prices have quadrupled in the past eight years, and crude oil has more than doubled. Higher prices have attracted increased interest from hedge-fund managers and pension funds.
Do they like commodities at higher prices? Yes.
Maybe it is different this time lord.
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9 comments:
If you think cyclical. Yes, it is different this time.
If you think secular. No, it isn't.
Maybe it is different this time lord.
Stag,
It is different this time, but not in the way most believe. Our eCONomy is now a complete sham. Wealth does not flow to productive endeavors as it once did. More and more, wealth now accrues to credit shams which are actually counter-productive in aggregate. Disturbingly, all Fed and CONgressional responses have been aimed at CONtinuing this destructive trend rather than ending it.
Something is seriously wrong when speculators and market makers earn billions yearly stripping assets and then dumping the liabilities on the Government. The fact that this process is celebrated rather than outlawed tells you how twisted our eCONomy has become. An the biggest fraud of all is that the asset stripping is done with credit created out of thin air.
The notion that borrowing requires saving is bogus - a dead CONcept. Credit is simmply CONjured out of thin air absent real savings - by FIAT. Senseless debt creation is labled as "savings" to enable more senseless debt creation.
There are mathematical, social and geo-political limits though. For every trillion in senseless debt created and booked as an asset, there is an offsetting trillion in senseless debt creation booked as a liability. Only the Fed's mindblowing credit creation schemes (cash for trash) has allowed Wall St. to keep pretending a sustainable check book balance between assets and liabilities still exists.
Despite the near collapse of the global financial system, the credit shams CONtinue. Even Buffett is getting in on the game. Berkshire's purchase of General Re with stock rather than cash in 1998 was telling. Berkshire's purchase of BNI with debt is even more telling.
Color me a skeptic, but I can't help but believe that health care reform is just another way to increase debt and off-load existing corporate benefit liabilities onto the Government.
CONsider, as of 2008, Other Post Employment Benefits (primarily medical benefits) for S&P 500 companies were unfunded by hundreds of billions. The OPEB liabilities are on top of hundreds in unfunded liabilities for traditional retirement benefits (pensions). So what is corprate management doing about the unfunded liability black hole? Well, they lobby CONgress for extensions and loopholes. All the while paying themselves more and more for the dis-service.
No way should the privilege of credit creation in a fiat system be used to extract wealth rather than produce wealth. Yet this is becoming the most accepted and rewarding use of credit.
Why is private equity debt deductible as an expense? Why are capital gains taxes far lower than income taxes? Why is mortgage debt deductible? Why does mortgage debt deductibility survive the alternative minimum tax calculations but state and local real estate taxes do not? Carried interest, 1029 exchanges.....I could go on and on. The sytem is set up to encourage debt over output.
The majority are screwed. Productive work is no longer a financially productive endeavor. As more and more people realize this, there's a growing potential that the resulting strains, both domestic and foreign, will overwelm the system.
The "Great Moderation" - bah! It really is different this time.
The Fed IS the moral hazard.
Moneta,
It will be interesting to see what happens to commodities when/if China completes their 30 million square feet of commercial real estate (according to Jim Chanos, in video I posted recently). It's enough to supply each and every man, woman, and child in China with a 5' x 5' cubicle.
mab,
"No way should the privilege of credit creation in a fiat system be used to extract wealth rather than produce wealth. Yet this is becoming the most accepted and rewarding use of credit."
I think you've really nailed it.
Oops. I said 30 million square feet. It's 30 BILLION square feet. Chanos had to correct himself too in the video. Go figure.
Cali pension plan can do whatever the F#ck they want, if it blows up (it will) it's taxpayer bailout time! How can you go wrong? Disgusting.
Can you buy copper by the logarithmic ton?
GYSC,
I think you can only buy lumber by the logarithmic ton. Badum-ching! ;)
http://futures.tradingcharts.com/chart/LU/M
Housing is certainly cheaper than it once was.
Hey, maybe I really could be the next chief economist over at the NAR. Logs? Land? What's the difference? Let's give it a try.
Trees are [a] screaming [bargain]. Time to back up the logging truck!
Peak logs! They just aren't making [m]any more of them!
People will always need homes. Therefore they will always need logs!
"Axe" your "staff" and use the cost savings to "cut down" your losses!
Oops. How did that last one get in there? *shrug shoulders*
"Its Log, It's log, its better than bad, its good!"
http://www.youtube.com/watch?v=jJSQNOWAvBA
GYSC,
Hahaha!
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