California State Pension and Stock Market Declines

I've been wondering what the impact of the recent market sell off would have on state pensions. One would assume that pension returns wouldn't drop at the same rate as the stock market as they're diversified across various asset classes. Yet, considering the pensions are of concern, any lower than planned returns will hurt.

Chief Investment Officer has an article up on how California is doing (these returns are prior to the December sell-off).

Baggesen [acting chief investment officer] didn’t given exact investment returns in detailing the low investment numbers to the CalPERS Investment Committee on Dec. 17, but CalPERS data from July 1 through Nov. 30 shows that the system lost overall a 1.9% during the five-month period.

Note that this starts from July 1st through November 30th. Looking at charts, the S&P 500 closed at 2,718 on Friday, June 29th. On Friday, November 30th, the S&P 500 closed at 2,760. So it actually increased during this time frame by 1.5%.

Sweden: Waiting until after Christmas

Per the Seattle Times the Swedes are planning on holding their final two votes for Prime Minister in January. Two votes have failed so far.

Sweden’s parliament speaker says no more attempts at forming a new government will be made this year, after more than three months of political deadlock following elections. Speaker Andreas Norlen says that two more attempts will be made in January before elections must be called under Sweden’s Constitution.

If both attempts fail, a new election will be required.

Bloomberg has more details:

Parliament speaker Andreas Norlen said on Wednesday that he will meet again with party leaders on Jan. 14 and called for a prime minister vote two days later. If that fails, a final and fourth premier vote would then be held on Jan. 23 in a last ditch effort to avoid a new election.

A Re-Look: International Maritime Organization (IMO) - About to Cause and Oil Spike?

OilPrice has an interesting article up on the upcoming January 2020 International Maritime Organization ruling regarding global shipping. The ruling will cut the sulfur content in maritime fuel from 3.5% to 0.5%. It was first announced in 2008 that this would be going into effect. The target date of 2020 was set in 2016.

Though the ruling was set in 2016, it wasn't until recently that economist Philip Verleger raised the red flag about the ramifications of this ruling. He argued that oil prices could hit $200 due to the ruling.

As for the shipping industry, there are three ways to meet the sulfur cuts:

1. Put scrubbers on their ships, which helps reduce the sulfur content.
2. Switch to LNG.
3. Buy lower sulfur content fuel.

Per OilPrice, it appears that the scrubbers option might not be viable:

Sweden: Failed Second Vote for Prime Minister and What's Next?

The Swedes held a second vote for Prime Minister. Per Bloomberg, Social Democratic leader Stefan Löfven failed to win the vote. Prior to the vote, Löfven attempted to pull away two of the parties associated with the Alliance coalition, Centre Party and Liberals. He is associated with Centre-left bloc. That attempt failed. The Alliance stuck together and the far right wing Sweden Democrats also voted against him:

Coalition talks between Lofven and key opposition parties collapsed earlier this week after the Center Party rejected forming a government with the Social Democrats amid disagreements on labor regulations and taxes.

What Bloomberg doesn't state is that Löfven's own block of parties (Centre-left) would probably have splintered if he had been able to work with the two Alliance parties.

Bloomberg had this interesting final paragraph:

Lofven wasn’t even present at the vote since he’s attending a European Union summit. Nationalist leader Jimmie Akesson was also absent, having traveled to Thailand on holiday with his family.

Libya: Wall Street Journal Profiles Khalifa Haftar

As those who follow Libya know, General Khalifa Haftar commands the eastern part of Libya via the Libyan National Army (LNA).

The Wall Street Journal recently did a profile on him. Some interesting comments:

Mr. Haftar’s growing international support was on display at summits in Paris in May and in Palermo, Italy, in November. There, he taunted Libya’s former colonial masters by threatening a boycott and then refused to attend a group dinner with the assembled Libyan and European leaders. Italian officials held a special meeting just for him and a smaller group of visiting leaders.

“Palermo showed that even Italy sees it as strategic to engage with him, and they actually went overboard accommodating his whimsical demands,” said Claudia Gazzini, a senior Libya analyst at International Crisis Group.

California: Pension Editorials

There are a handful of editors that have popped up regarding the topic of California pensions.

Here's one from the Mercury News. Some interesting notes:

Newsom will inherit a staggering $257 billion shortfall in state and school workers’ pension and retiree health care funds . . . So when state Legislative Analyst Mac Taylor gushed earlier this month about the annual state budget being in “remarkably good shape” with a forecast $15 billion surplus for the upcoming 2019-20 fiscal year, we had to question that characterization. The only reason there is a surplus is because Brown kept payments on retirement debt low by irresponsibly stretching them out for decades.

That's an interesting note about the $15 billion surplus. One could call it smoke and mirrors. I'm assuming without stretching out the pension payments, we'd be in a deficit. At least, this is how I read the sentence.

Venezuela: economic collapse leads to environmental pollution

Bloomberg has a short article up about how Venezuela's economic collapse has led to environmental pollution. This pollution is driven by what should be bringing in the most wealth for Venezuela: oil.

PDVSA’s cleanup policy is, on paper, strict, because “if spills aren’t quickly attended to, they become environmental liabilities,” said Carmen Infante, a Caracas-based industry consultant . . . According to workers in the field, many of the services contractors that specialize in sponging up spills, with trucks equipped with giant vacuums, have gone out of business because they’ve had such trouble getting paid by PDVSA.

The reason for this: as the headline states, a lack of investment in their oil industry has led to a breakdown in equipment. It is an indication of how important it is to always invest in continued upkeep, because if you don't the problem eventually explodes. As the article ends with:

Sweden: Moving Closer to Resolution?

As a quick repeat of events: Sweden is currently attempting to form a government due to an inconclusive election. To form a government, a party (or group of parties) needs 175 votes. A minority government can form if other parties allow it by abstaining to vote. As mentioned in prior blogs, there are 2 main blocks of parties: the centre-left and the Alliance. There is also the far-right Sweden Democrats.

There have been some informal attempts to form a government. And one official vote that failed to get Ulf Kristersson of the centre-right Alliance in as Prime Minister. There can only be four official votes before new elections must be held.

And just to list out the major players/facts:

Swedish parliament speaker: Andreas Norlén
Leader of the centre-right Alliance (Moderate party): Ulf Kristersson
Past prime minister though still caretaker of the government (centre-left bloc): Stefan Löfven
Sweden Democrats leader (far right political group): Jimmie Åkesson
Centre Party leader: Annie Lööf
Liberals leader: Jan Björklund

Centre-left bloc parties (144 total seats):

Social Democrats (100 seats)
Left Party (28)
Green Party (16)

Alliance parties (143 total seats):

Moderates (70)
Centre Party (31)
Christian Democrats (22)
Liberals (20)

Sweden Democrats (62)

Okay . . .

With Ulf Kristersson failing to get the needed votes to form an alliance, the job to form a government went to Stefan Löfven, the leader of the centre-left bloc; former Prime Minister, current caretaker Prime Minister.