Pension
liability looms over U.S. states' economies: group - (www.reuters.com) Public
pension liabilities in five U.S. states could represent more than 40 percent of
their local economies, according to an analysis released on Tuesday by a
conservative group that lowered the assumed rate of return for pensions'
investments. The group, State Budget Solutions, which aims to reform budgeting
practices by state and local governments, used a rate of return that is less
than half the historical averages that are used by most public pensions. State
Budget Solutions found retirement systems are short $4.1 trillion to pay future
benefits in total, based on a projected rate of return on investments of 3.225
percent, which it said was the 15-year Treasury bond yield on August 21. Historical
averages are usually between 7 percent and 8 percent. Because they have to deal
with long periods of time, pension administrators prefer the averages, which
they say are the safest measures for anticipating future performance.
Richmond,
CA, bailing out HELOC abusers for profit - (www.ochousingnews.com) I
recently wrote about Richmond, CA, moving to seize mortgages through eminent domain. If this plan were to succeed, it would break
the banks. Other municipalities would almost certainly follow suit, and the
losses would devastate the banking system, probably requiring the
nationalization of our major banks (something we should have done in 2008). In
military terms, this puts the banks on death ground. They must fight this
battle and win, or they will die. Since this is so important to the banks,
expect to see every manner of attack and defense brought to bear. In response
to the recent request of Richmond, CA, to sell a large number of mortgages at
prices significantly below book value on the loans, the banks are firing back.
They employed a consultant to look up the details on each individual loan
they’ve requested to buy. Richmond is offering to buy both current and
delinquent loans. To defend against the charge that irresponsible
homeowners who used their homes as A.T.M.’s are being helped at the expense of
investors, the first pool of 626 loans does not include any homes with
large second mortgages, said Steven M. Gluckstern, the chairman of Mortgage
Resolution Partners.
India
crisis threatens big hit on banks - (www.ft.com) Mr
Rajan, formerly chief economist of the International Monetary Fund, is credited
with having warned of the financial fragilities that led to the global
financial crisis of 2008, and economists and analysts say he is right to focus
in his new job on the weaknesses of Indian banks. Fears are rising for the
health of India’s banking system as slowing economic growth and rapid currency depreciation threaten to worsen asset quality and reduce
demand for bank credit from large industrial companies. Non-performing and
restructured loan levels in Asia’s third-largest economy have risen steadily
over the past year to stand at about 9 per cent of assets and could reach 15.5
per cent over the next two years, according to Morgan Stanley.
Once-Hot
Indonesia Loses Allure as Prices Chill Buyouts - (www.bloomberg.com) Indonesia
has lost much of its allure for private equity as steep valuations restrain
buyouts in a country that two years ago was, in the words of one investor,
“probably the sexiest destination in the emerging
markets.”
International private-equity firms have acquired stakes in four Indonesian
companies this year, down from 10 in 2011 and seven last year, according to
data compiled by Bloomberg and the Asian Venture Capital Journal. Total transaction values fell from $649
million for the nine deals in 2011 where terms were disclosed to $324 million
for the six deals last year for which prices were available, the data show. Deals
have fallen precipitously this year, to $87 million for three of the four
announced deals. The biggest was a purchase by KKR & Co. (KKR) making its first entry into Indonesia in
July, buying a stake in publicly traded noodle maker PT Tiga Pilar Sejahtera Food (AISA) valued at $35 million, according to data
compiled by Bloomberg.
Russia
Joins India to Taiwan in Missing Debt Auction Targets - (www.bloomberg.com) Russia failed to raise as much money as planned
at a government bond auction, joining nations from India to Taiwan in missing borrowing targets as investors
keep away from emerging-market assets. The Finance
Ministry in
Moscow sold 6.07 billion rubles ($182 million) of its so-called OFZ notes due
May 2016 after offering 13.6 billion rubles, according to a statement on its
website. Russia canceled an auction last week as only one bidder took part. The
ministry issued today’s bonds at a 6.5 percent average yield, the top of its
proposed range. Developing nations are scaling back as the prospect of the U.S.
paring financial stimulus measures and tensions over Syria curb investor
appetite for riskier assets. India’s central bank said it cut the size of a
debt auction this week to 100 billion rupees ($1.5 billion) from 150 billion
rupees. Indonesia scaled
back an Islamic debt offering for the first time since July, while Taiwan’s
note sale yesterday fell short of the government’s goal for the first time
since 2011.
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