Thursday, August 22, 2019

Retirees Smear JJ

The Mississippi Retired Public Employees Association smeared this website in its spring newsletter.  The newsletter had a page devoted to media coverage.  It quoted the opening paragraph of the April 9 post on this website:


Check out the questionnaire posted below that the Mississippi Retired Public Employees' Association sent to legislative candidates.  The fourth question is particularly interesting.

 Question 4: Do you support adjusting employer contribution rates in accordance with the recommendation of the actuary and state law should that become necessary in the future to maintain the fiscal solvency of the system? Yes or No.”
The newsletter omits the rest of the post and then cherry-picks comments to make it seem all of you are bunch of meanies who want to burn retirees at the stake.




However, the newsletter conveniently leaves out Kingfish's own comment at the end of the post:


Kingfish note: More proof that the retirees have their heads stuck in the sand. The reality is PERS is stuck at a funding level of around 60% despite earning 9% on its investments over the last ten years.  The retiree population grows as there are now more than 104,000.  The benefits payments continue to outstrip the contributions to the tune of $1 billion per year. Meanwhile, the unfunded liability reached $16.9 billion this year.   That is the reality of PERS today. Earlier post.
Now why would the leadership leave that comment out of the newsletter? 

Make no mistake, the association's leadership does not want its members to hear any dissenting views or independent information.  It never discusses the actual finances of PERS and tries to intimidate anyone who wants to have such a discussion.  The leadership only knows one note: gimme, gimme, gimme. Costs or solvency be damned.    Well, try as they might, the retirees are not going to shut up or shut down this website.  Period.





37 comments:

Anonymous said...

This means that you got under their skin. Keep up the good work.

Anonymous said...

You know you're over the target when you're taking flak.

Anonymous said...

PERS is being raided by part-time workers (legislators, county supervisors, etc.) who all get sweet-heart deals to get fat checks. Worst part of it is that these part time employees reach vested status much faster than full-time employees (primarily educators.)

Maybe somebody, somewhere will decide that PERS needs to be run like an actual retirement fund and not a SLURP account for part-timers.

Anonymous said...

I normally hate the PERS stories, but I guess this counts as news

Anonymous said...

will the last one to leave the room please turn off the lights-

Anonymous said...

So if Waller does increase the teachers pay will this further affect the retirement system? I mean more pay means the state has to pay more into PERS and the teachers get more back when they retire.

Anonymous said...

Waller wants to raid the rainy day fund to keep his promises to teachers and leave the state fiscally vulnerable. But, considering the existing vulnerability and negative taxpayer exposure due to PERS dramatic underfunding, Waller is only proceeding upon an already well beaten path to disaster.

Anonymous said...

@10:44 well stated.

Anonymous said...

TWO SMART GUYS PART 1:

An analysis of Mississippi PERS portfolio performance for the 10 year period ending June 30, 2018

Based on published data, it is understood that Mississippi PERS has at least three significant forms of difficult headwind vs best circumstances

In particular, there are currently a larger number of retirees receiving PERS pensions as compared to a smaller number of workers contributing to PERS at this point in time. This imbalance creates a shortfall that is difficult to overcome without increased employer/employee contribution rates which have been occurring over the last decade.

Additionally, it's understood that the assumed rate of return of the PERS portfolio prior to 2015 was 8.0% per year, annualized, and has now been adjusted to 7.5%, which is a safer assumption of long term market returns, if adequate.

The 10 year annualized historical return for the PERS collective portfolio (approximately a 60/40 portfolio, 61% stock, 20% bond, 10% real estate, 8% private equity, 1% cash) is 7.45% as of June 30, 2018 (Page 13, PERS Facts and Figures as of June 30, 2018 - https://www.pers.ms.gov/Content/Supplemental/persfacts_figures.pdf). It is unclear if this performance is net of investment fees.

The 10 year annualized historical return of the Vanguard VBAIX - Balanced Index Fund Institutional Shares (60% US total stock market index, 40% US total bond market index) is 7.98% as of June 30, 2018, with an expense ratio of six one-hundredths of one percent. (.06%) factored into the performance.
https://institutional.vanguard.com/VGApp/iip/institutional/csa/investments/customreports/fund

For FY 2018, PERS reports management fees of $105,462,000 charged by over 40 investment managers managing 55 portfolios containing $28.2 billion under management. It is not clear if this number includes the investments expenses, such as overall expense ratio of the fund(s) within the portfolios as well as managers fees.
(Page 73, Schedule 2, PERS Comprehensive Annual Financial Report June 30, 2018 - https://www.pers.ms.gov/Content/CAFR/PERS_CAFR_2018.pdf)

Ironically, such a large collection of varied portfolios and investment managers ultimately collectively "own the market" in a similar manner as would just holding one broad index mutual fund. Such a collection of investments performs similarly minus their additional management, stock/bond trading costs and fund expenses as compared to a well-run passive, broad market index fund.

It would appear these PERS-stated "investment management costs" appear be close to the amount of PERS under-performance versus broad stock and bond market indices over the last decade.

Anonymous said...

TWO SMART GUYS PART 2:

As a comparison, If $28.2 billion were placed in Vanguard VBAIX - Balanced Index Fund Institutional Share, the annual fee would be $16,920,000, saving approximately $88,542,000 per year or more than $880,000,000 dollars over 10 years. Greater savings can be achieved by PERS manually maintaining a 60/40 balance using Vanguard Total Bond Market Institutional Plus fund (VSMPX) at 0.02% expense ratio and Vanguard Total Bond Market Institutional Plus fund at 0.03% expense ratio. The use of these two funds with minimal management effort are estimated to save PERS approximately $100,000,000 (one hundred million) per year in management fees.

Furthermore, the additional 0.53% performance advantage of a VBAIX portfolio as compared to a $19,691,325,000 ($19.7 billion) dollar PERS portfolio (starting in FY 2008) would amount to an extra $104,364,022.50 per year starting in FY 2008, and increasing to $149,460,000 as of FY 2018.

There has been and will likely continue to be a greater than 90% probability that Vanguard broad-market stock and bond index funds or any large investment company with similar index fund and cost offerings would outperform any given actively managed fund(s) over 10 years for the period ending December 31, 2017.
It is very likely this will be repeated in the future. The principal difference is the trading and management costs. However small they may seem, the difference between 0.50% or 1.0% in fees vs .03% in fees cannot be overstated. It can add up to be over well over 30% of the final portfolio balance after 30 years.
https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/NewsPerformanceReport4Q2017

Between the reduced fees and the increased performance, PERS would now have accumulated close to an additional $3 billion, or around 10% in additional portfolio value over the last 10 years.

PERS would also have enjoyed a much simpler portfolio structure with less market activity, including frictional losses due to trading and active management as well as no portfolio overlap across portfolios and managers.
These performance differences would likely be magnified over greater time periods, again growing to possibly more than 30% additional portfolio value over 30 years.


References:

Vanguard references:

PERS document references:
https://www.pers.ms.gov/Content/Supplemental/persfacts_figures.pdf

https://www.pers.ms.gov/Content/CAFR/PERS_CAFR_2018.pdf

Vanguard custom fund performance reporting URL (used to compare apples-to-apples PERS July 1-June 30 investment performance)
https://institutional.vanguard.com/VGApp/iip/institutional/csa/investments/customreports/fund

Vanguard VBAIX - Balanced Index Fund Institutional Shares data:
https://institutional.vanguard.com/web/cf/product-details/fund/0869

Additional information:
"Warren Buffett beat the hedge funds. Here's how:"
https://money.cnn.com/2018/02/24/investing/warren-buffett-annual-lett

Anonymous said...

What 10:50 said. But no chance in he’ll elected officials will change PERS except to pay them more.
Aptly named SLURP; bunch of pigs at the trough.

Anonymous said...

Based on the Smart Guys comments above the people getting rich are the fund managers that have wined and dined the PERS folks to use their services. If they can't beat the market over any 10 year period (and they can't), what is the point in giving them hundreds of millions of dollars? The fund managers have to keep making adjustments to their portfolios in order to "attempt" to beat the market (collection of all stocks or a sub-collection like the SP500). Just thinking through the frictional losses between bid/ask price that could amount to another $200M of frictional loses in any given year in addition to the +$100M in fees that are "transparent". It leads me to believe that not a single person at PERS understands investing and that is why we added years of labor, increased withholding/employee-match which is just another tax on Mississippians.

Anonymous said...

2 smart Guys- I just scanned but great work. My main complaint as usual was the 13th check. If you had not done that the program would have been much more solvent. Again, Social Security does not give you a 13th check. they may give you a 2% cost of living raise but nothing else based on a return, which we all know they don't have a return on that money.

Anonymous said...

Two Smart Guys:

From a professional money manager's point of view (I don't manage anything with PERS or any public pension money)...

While I understand what you are trying to portray, there are different characteristics of institutional managed risk compared to the risk of the everyday investor.

I agree with a passive over active strategy (especially in equities) and I also agree with the use of lower cost ETFs/indexes over mutual funds. However, in the case of fixed income, the active manager will typically out perform the broad sector funds because of the math and quality adjustments that can be utilized to produce alpha in that sector. In other words, the fixed income manager will know where the prices are undervalued and can pick those particular investments to create more profit (that case could be made for equity managers as well). The big difference is in the calculation of duration. While an index like AGG will represent the overall bond market's gains and losses, a customized portfolio with specific investment quality can give a greater return per unit of risk. Usually, the pension investment teams take in account these gains minus manager costs and benchmark them with their passive counterparts. If they can't outproduce the broad market, they're cut.

Some investments like Private Equity and Real Estate have inherent management costs. There is no way around that. Someone has to keep the buildings leased and make sure the PE deals get done.

As for institutional risks, every investment company has their own niche. Going directly with a large passive manager like Vanguard on an entire sleeve of a multi-billion dollar portfolio would carry large amounts of company risk. Imagine if Vanguard had some internal fraud or mismanagement (Bear Sterns?). Billions could/would be lost... of hardworking everyday people's life savings. When you are talking Billions, it takes multiple companies and managers.

I do agree that the equity sleeves should be more passive than active and everyone should have to prove their worth to have a piece of the pie. (I also don't doubt that they get split costs or kickbacks from some companies. However, pensions are under so much scrutiny, I doubt it's much.) However, just to look at expense ratios in a vacuum doesn't round out the whole equation.

- A Professional Money Manager

Da Fat Man said...

Anonymous Anonymous said...
2 smart Guys- I just scanned but great work. My main complaint as usual was the 13th check. If you had not done that the program would have been much more solvent. Again, Social Security does not give you a 13th check. they may give you a 2% cost of living raise but nothing else based on a return, which we all know they don't have a return on that money.

August 22, 2019 at 12:29 PM

My understanding of the 13th check is that it is the cost of living raise paid in a lump sum instead of spread out over the year. Being that one would receive it anyway, why do you object to it?

Anonymous said...

Waaaaaaaaaa.... waaaaaaaaa.... waaaaaaaa... Kingfish can dish it out, but can't take it...

And the commenters on this site? Did you read the comments on that article referenced? They were 90% negative.

Anonymous said...

TWO SMART GUYS

He gets paid to win and maintain clients that didn't do their homework.
https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/NewsPerformanceReport2Q2019

Statistically the most likely outcome is out-performance in any time range from 1 to 10 years (and longer of course). "You get what you don't pay for", no Professional Money Manager.

The Prime Reserve "broke the buck" (failed) precisely because they had to invest in riskier investments to offset the Professional Money Manager fees.
https://en.m.wikipedia.org/wiki/Reserve_Primary_Fund

This is what a "Professional Money Manager" will get you.

-

Vanguard has $5.3T (Trillion) in assets under management. I would trust it a bit more than the assortment of 50 advisers handling PERS assets. If that is bothersome then put half in Fidelity index funds, or distribute a third to Blackrock index funds.

The ultimate point here is that the Professional Money Manager does not add value.

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" -- Upton Sinclair

Anonymous said...

Education is failing in this state, health care and access to it is pitiful, roads and bridges need repair, highways full of trash, young educated people are leaving for better paying jobs, PERS is BROKE, MPACT also has funding issues, the DMV is a complete joke, embezzlement by public employees is rampant, the youth courts and child services is a mess and mental health care is a problem.

Can someone please explain what the government, state or local, gets right in this state?

Anonymous said...

In everything there has to be a last place.
Mississippi has a lock on last place in every list of good things and first place on every list of bad things. It should be easy to understand why that is.
Education, either the teachers are not doing their job or the children are not capable of learning the things that children learn in other states.
Healthcare, roads and bridges, PERS, MPACT are in trouble because of the crooks we have taking care of them.
DMV is a joke because people are not hired for their ability to do the job but are hired because of what color of their skin. They don't know how to do their job and know they cannot be fired because of the same reason they were hired.
Government, everyone old enough to vote should already have learned that all politicians are crooked. The people continue to vote them in because they have a D or R in front of their name.

See, it is really simple why Mississippi is the way it is. The people want it that way.

Anonymous said...

Two Smart Guys...

Stay amateur. Leave the professional money management to the professional managers. Not all managers are bad and ALL have to justify their fee plus alpha over their passive benchmarks... yes, that means beating passive indexes every year. They also have to balance portfolios to where they have stop losses in downtowns too. Try that with a passive Vanguard index.

I think you are confusing “wealth managers”, “investment professionals”, and “Dave Ramsey types” as professional Money Managers. You can’t go to your local bank (or, in MS’ case, whole state) and find a real money manager. Most are in bigger cities with higher net worth clientele. A good money manager absolutely justifies his/her fee plus some.

“Go make me as much money as you can ” - no pension manager ever.

Anonymous said...

8:25-

You must know more then Warren Buffet so I expect your balance sheet will prove that.

Buffett knows that most money managers, big cities or otherwise, do not earn their fees.

https://money.cnn.com/2018/02/24/investing/warren-buffett-annual-letter-hedge-fund-bet/index.html

Anonymous said...

TWO SMART GUYS- is something you wont find in a group of politicians or lawmakers in MS.

Anonymous said...

How about the county supervisor who steps down to run for another local office and loses. Then becomes a basketball coach for a couple years just so they can collect PERS retirement. Shouldn't you actually be a basketball coach?

Anonymous said...

Making money on the stock market "does not require great intelligence, a degree in economics or a familiarity with Wall Street jargon," he wrote. "What investors then need instead is an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals."

"Stick with big, 'easy' decisions and eschew activity," Buffett said.

Anonymous said...

TWO SMART GUYS

Mr. Professional Money Manager there is no confusion here. Please back up your comments with data. Link us to a 60/40 pension portfolio or data for an actively managed fund that beat the total market index over any 10 year period. Anyone can cite a single year where a lucky Money Manger beat the market, but show us one that can do it over a ten year period.

We provided links, show us yours. Please justify your existence.

Anonymous said...

Get Tate to weigh in on this. He’s our money expert, right?

TWO SMART GUYS said...

TWO SMART GUYS

Why would PERS Management, State Employees and Politicians listen to Two Smart Guys? They all have something to lose by continuing down the same path. We propose a fundamental change in the way assets are managed that will benefit retirees and tax payers going forward. Using the model we propose could have added a potential +$3B (Billion) to PERS balance sheet over the past 10 years. There is near certainty that making the changes we propose would maximize growth and manage risk going forward.

The notion that a fund manager can do something magical during a market downturn is false. The reason is simple, they cannot predict the future. This is why dollar cost averaging works better in the passive indexing model we propose. By making these changes you also add back hundreds of millions eventually adding up to billions of dollars wasted on "Professional Money Managers".

If Two Smart Guys can't convince you that PERS is severely mismanaged, perhaps more links:

How Pension Funds Destroy Investors’ Wealth:
https://www.advisorperspectives.com/articles/2019/02/07/how-pension-funds-destroy-investors-wealth?utm_source=articles_feed&utm_medium=rss&utm_campaign=item_link

Saving Billions By Indexing State Pension Funds:
https://www.forbes.com/sites/thebogleheadsview/2016/03/15/indexing-state-pension-funds/#2695fa2279d6

Anonymous said...

PERS is basically a ponzi scheme legalized and endorsed by the legislature. PERS should offer an opportunity for a one-time buyout.

Anonymous said...

Its a good thing that no pension fund has every gone belly up. Oh, wait......

Anonymous said...

2:38..Ima write your comment down so I can remember it clearly and since this is the first time we've heard about PERS being a Ponzi scheme, not counting the other 572 times it's been posted here in the past ten months. Thanks for dropping by.

Anonymous said...

4:55, you're welcome!

Anonymous said...

#1) Warren Buffet is not a passive investor. He buys majority holdings of undervalued companies and leverages that power to rearrange the management to his liking... which is pretty much the definition of an active investor. He also makes his money by selling the shares at higher price once the profit of the company has been streamlined due to his management. He doesn't have to use his holdings to hit guaranteed monthly distributions to millions of retirees. Comparing Buffet to a pension plan is one of the most absurd analogies that I have seen. That's like comparing apples to airplanes.

#2) Let's do some simple math on diversification. Let's say you had an Vanguard S&P portfolio with $1M. Let's say a downturn happened... easy math so everyone can follow... let's say it dropped 50%. That gives us $500k. To get back to that original $1M, how much interest would you have to make?

50%? You dropped 50%. Why not? Well, a 50% return on $500k is $250k + $500 in principal. That's $750k. Nope. Let's just skip to the answer... You'd need a 100% return to get back to scratch. You'd have to double your money. See, investment returns aren't linear and they don't work like 99% of people think they do. That's why investment professionals diversify into sleeves that are correlated and non-correlated to the market in order to overcome downturns. There is no "predict the future" to it. Just research and math. The best way to make money is not to lose it.

Imagine having to pull an income stream out of a portfolio that just lost 50% in the market all while trying to gain enough interest to get back to even. Will. Never. Happen. But that is the situation you would set yourself up for by investing in a "60/40 Vanguard ETF". Professional money managers are in the business of keeping the principal safe while taking measured amounts of risk on the investments to hit a guaranteed rate of return... not rolling the dice and hoping. Anyone and their momma could've hit double digits the past 12 years by throwing at a dart board of stocks. It's making these amateur Wall Street chest thumpers come out of the woodwork. Unfortunately, everything reverts to the mean, and those chest thumpers will have their tails between the legs soon enough.

3) The problem with pension funds isn't the investments or the money managers. It is that there aren't as many people paying into the plan as getting paid from the plan. Back when the mortality age was 65 and people retired at 59, pensions worked because you had more, or as many, people paying in as retired. Now, people want to get their check after their 30 years and then live another 30. It is simply unachievable without current employees having to increase their portion substantially. Then these plans become unpopular with the employees and management and are cut. They just don't work anymore... but, it has nothing to do with the investments.

TWO SMART GUYS said...

TWO SMART GUYS

Mr. Professional Money Manager, please find our responses in bold.

#1) Warren Buffet is not a passive investor. He buys majority holdings of undervalued companies and leverages that power to rearrange the management to his liking... which is pretty much the definition of an active investor. He also makes his money by selling the shares at higher price once the profit of the company has been streamlined due to his management. He doesn't have to use his holdings to hit guaranteed monthly distributions to millions of retirees. Comparing Buffet to a pension plan is one of the most absurd analogies that I have seen. That's like comparing apples to airplanes.

We'll start by letting you know you'll need to highlight, then press CTRL-C to copy and CTRL-V to paste the following links in your web browser, in case that's something new to you. If you are on a Mac try CMD-C, CMD-V. This will come in handy if you actually have data to contribute.

1) Unlike you, as long-time investors in Berkshire Hathway, we've read virtually every annual report and shareholder letter since 1959, and even attended the annual shareholder meeting in Omaha, so your superficial, made-it-up-as-you-went understanding of Warren Buffett and Charlie Munger and how they manage BH is so sadly mistaken, it's actually just comical.
https://www.berkshirehathaway.com/

First off, approximately $200 billion of BH equity investments are in publicly-traded companies that largely components of the S&P500 itself.
https://www.cnbc.com/berkshire-hathaway-portfolio/

In addtion, BH wholly owns more than 50 companies, both large and small.
Buffett is the ultimate buy and hold, hands-off manager his HQ office in Kiewitt Plaza, Omaha NE only employs about 20 people. He will only buy companies that have strong management, get basic performance reports from them on a monthly basis, let them continue to succeed in the manner that made their company attractive in the first place.
BH is simply provides cheap capital when needed, and provides a "safe haven" for these businesses to operate, free of having to make quarterly numbers, etc.


He is noted for stating his "favorite holding period is forever"
https://fortune.com/2016/12/14/warren-buffetts-very-ordinary-management/
https://www.nasdaq.com/article/warren-buffetts-top-4-tips-for-everyday-investors-cm1159609

Warren Buffett says index funds make the best retirement sense ‘practically all the time’

https://www.cnbc.com/2017/05/12/warren-buffett-says-index-funds-make-the-best-retirement-sense-practically-all-the-time.html

Lastly, even BH is having trouble outperforming the S&P500 lately
https://www.marketwatch.com/story/no-one-will-ask-this-one-question-hanging-over-berkshire-hathaways-annual-meeting-2019-05-03

TWO SMART GUYS said...

TWO SMART GUYS

Continued...

#2) Let's do some simple math on diversification. Let's say you had an Vanguard S&P portfolio with $1M. Let's say a downturn happened... easy math so everyone can follow... let's say it dropped 50%. That gives us $500k. To get back to that original $1M, how much interest would you have to make?

50%? You dropped 50%. Why not? Well, a 50% return on $500k is $250k + $500 in principal. That's $750k. Nope. Let's just skip to the answer... You'd need a 100% return to get back to scratch. You'd have to double your money. See, investment returns aren't linear and they don't work like 99% of people think they do. That's why investment professionals diversify into sleeves that are correlated and non-correlated to the market in order to overcome downturns. There is no "predict the future" to it. Just research and math. The best way to make money is not to lose it.

Imagine having to pull an income stream out of a portfolio that just lost 50% in the market all while trying to gain enough interest to get back to even. Will. Never. Happen. But that is the situation you would set yourself up for by investing in a "60/40 Vanguard ETF". Professional money managers are in the business of keeping the principal safe while taking measured amounts of risk on the investments to hit a guaranteed rate of return... not rolling the dice and hoping. Anyone and their momma could've hit double digits the past 12 years by throwing at a dart board of stocks. It's making these amateur Wall Street chest thumpers come out of the woodwork. Unfortunately, everything reverts to the mean, and those chest thumpers will have their tails between the legs soon enough.

2) Your logic is flawed. Actually we don’t even see the presence of an actual, cogent point.
Professional Money Managers have no better clue than anyone as to the timing, extent and duration of any downturn or upturn in the market. This is shown in their 90%+ likelihood of underperfomance against the S&P500 over time. You also conveniently neglected to include a short or intermediate bond index fund to create a balanced portfolio, thus dampening loss percentages, but that wouldn't allow you to exaggerate your deeply flawed thesis. Again, as Upton Sinclair stated, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” We have been investing since the 1980's and have seen mutliple market downturns starting with the October crash of 1987. Any smart investor, including the "professional money managers" know indexing is the correct approach at all investing levels. Many of them index themselves, they just know they need to fool their clients into believing they add value. So be truthful to them and yourself.

TWO SMART GUYS said...

TWO SMART GUYS

Continued...

#3) The problem with pension funds isn't the investments or the money managers. It is that there aren't as many people paying into the plan as getting paid from the plan. Back when the mortality age was 65 and people retired at 59, pensions worked because you had more, or as many, people paying in as retired. Now, people want to get their check after their 30 years and then live another 30. It is simply unachievable without current employees having to increase their portion substantially. Then these plans become unpopular with the employees and management and are cut. They just don't work anymore... but, it has nothing to do with the investments.

3) The problem with pension funds is incorrectly-rosy (7-8% annualized) future return assumptions, a larger base of retirees than active workers, and especially the money managers and their largely useless, likely overlapping strategies to attempt to fool pension management they can consistently provide alpha.
The professional money managers are simply well-paid leeches, as you probably already well know (mirror please, someone?).
Statistically, it is highly probable we have significantly outperformed you as a "professional money manager" over the years.

Anonymous said...

Look, I don't have time to argue on the internet with a financial neophyte. Last post...

1) Since you seem to know Buffet personally, ask him how he comes about his valuations of stocks and why he buys those selective businesses and shares instead of just purchasing a passive Vanguard ETF. After all, passive beats active, right.(Yes, that's sarcasm. And yes, you just literally just proved my point in your post that BH actively manages its purchases and holdings.)

2) You must be a politician. That was the most run-around answer I have ever seen. Do you even math, bro? Prove me wrong with math not random links to someone else's flawed theories. Professional Money Managers don't try to outperform the market. They use active and passive non-correlated assets to hedge a portfolio from losses. Try to keep up, young grasshopper. To dumb it down, they pay you to not lose money... they don't pay you to outperform the S&P.

Since you like links so much... Here is a book to teach you the actual principles of investing from someone who produced a 16.1% return over 20 years with less risk than the market... for... you guessed it... an endowment fund. "Dumbass" - Happy Gilmore.

https://www.amazon.com/Pioneering-Portfolio-Management-Unconventional-Institutional/dp/0684864436

3) You have no idea what you are talking about with regards to pensions and it shows. But hey, keep quoting Buffet. Maybe he'll bring you on stage at one of those swank investor parties. Then you can tell the whole world how awesome you are. Until then, I'm out.

-One Smarter Guy

TWO SMART GUYS said...

Two Smart Guys

Since you are going to let us have the final word (good idea), HERE GOES:

For anyone reading the tail end of this conversation, we originally argued that PERS would have been much better off over the last decade without active fund managers. Possibly to the tune of +$3B (Billion) in assets. We used a passively managed Vanguard Balanced Index Fund (VBAIX) as an example. Ultimately we argue that hundreds of millions of dollars are being wasted on the services of over 40 money managers. We argue that PERS should get rid of all money managers and move assets into passively managed funds with no overlap. This particular bottom feeder claims these money managers provide value in mitigating losses during market downturns. Let's take a look at that:

To quote Mr. Professional Money Manager, "they pay you to not lose money" (you being them, the Professional Money Manager)

PERS lost 19.4% during the 2008-09 fiscal year (recession), during this same period VBAIX only dropped 13.14%. PERS (managed by "professionals") LOST 6.26% more than VBAIX during the same period. Someone said Tate Reeves was the "money guy", he was certainly on the PERS Board during this period. You can now thank him for contributing to the mismanagement of your retirement system at the Governors Office.

To quote Mr. Professional Money Manager, "They use active and passive non-correlated assets to hedge a portfolio from losses".

These guys claim to be able to do something magical for investors to prevent losses during market downturns. PERS had dozens of these people managing money during FY2009 and still managed to underperform VBAIX by 6.26%. This is precisely the time when the money managers should be able to provide the value they claim to provide. When you are dealing with $20-$30B (Billion) these percentages are tremendous. An even larger problem is that they also significantly underperformed the market during the subsequent recovery as well, likely to the tune of $3B (Billion). Bad management in both directions...


Listed below are the FY2009 values with quarterly dividend reinvested, and subsequent calculated return for:
VBAIX (Vanguard Balanced Index Fund 60/40, Institutional)
---------------------------
7/01/2008: Open $20.39
09/25/2008: $19.62 Dividend: $0.149 Dividend% 0.76
12/26/2008: $16.24 Dividend: $0.163 Dividend% 1.00
03/26/2009: $15.88 Dividend: $0.137 Dividend% 0.86
06/25/2009: $17.02 Dividend: $0.122 Dividend% 0.72
06/30/2009: Close $17.03
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16.48% (minus yield of 3.34%), a loss of 13.14% as compared to a PERS loss of 19.4%

They argue that it makes sense to use their services to mitigate risk despite the fact that they underperform when times are good. You can roll this experiment backwards and forwards. The results are the same, they are stealing your retirement fund. Discard the "Professional Money Managers", you don't need them and neither does PERS.

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TWO SMART GUYS not trying to make a dime for our efforts; we already have (in excess) using our own hard-earned savings. Our publishing efforts are for the public good, you can easily invest the same way and will likely prosper over time.

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Trollfest '09

Trollfest '07 was such a success that Jackson Jambalaya will once again host Trollfest '09. Catch this great event which will leave NE Jackson & Fondren in flames. Othor Cain and his band, The Black Power Structure headline the night while Sonjay Poontang returns for an encore performance. Former Frank Melton bodyguard Marcus Wright makes his premier appearance at Trollfest singing "I'm a Sweet Transvestite" from "The Rocky Horror Picture Show." Kamikaze will sing his new hit, “How I sold out to da Man.” Robbie Bell again performs: “Mamas, don't let your babies grow up to be Bells” and “Any friend of Ed Peters is a friend of mine”. After the show, Ms. Bell will autograph copies of her mug shot photos. In a salute to “Dancing with the Stars”, Ms. Bell and Hinds County District Attorney Robert Smith will dance the Wango Tango.

Wrestling returns, except this time it will be a Battle Royal with Othor Cain, Ben Allen, Kim Wade, Haley Fisackerly, Alan Lange, and “Big Cat” Donna Ladd all in the ring at the same time. The Battle Royal will be in a steel cage, no time limit, no referee, and the losers must leave town. Marshand Crisler will be the honorary referee (as it gives him a title without actually having to do anything).


Meet KIM Waaaaaade at the Entergy Tent. For five pesos, Kim will sell you a chance to win a deed to a crack house on Ridgeway Street stuffed in the Howard Industries pinata. Don't worry if the pinata is beaten to shreds, as Mr. Wade has Jose, Emmanuel, and Carlos, all illegal immigrants, available as replacements for the it. Upon leaving the Entergy tent, fig leaves will be available in case Entergy literally takes everything you have as part of its Trollfest ticket price adjustment charge.

Donna Ladd of The Jackson Free Press will give several classes on learning how to write. Smearing, writing without factchecking, and reporting only one side of a story will be covered. A donation to pay their taxes will be accepted and she will be signing copies of their former federal tax liens. Ms. Ladd will give a dramatic reading of her two award-winning essays (They received The Jackson Free Press "Best Of" awards.) "Why everything is always about me" and "Why I cover murders better than anyone else in Jackson".

In the spirit of helping those who are less fortunate, Trollfest '09 adopts a cause for which a portion of the proceeds and donations will be donated: Keeping Frank Melton in his home. The “Keep Frank Melton From Being Homeless” booth will sell chances for five dollars to pin the tail on the jackass. John Reeves has graciously volunteered to be the jackass for this honorable excursion into saving Frank's ass. What's an ass between two friends after all? If Mr. Reeves is unable to um, perform, Speaker Billy McCoy has also volunteered as when the word “jackass” was mentioned he immediately ran as fast as he could to sign up.


In order to help clean up the legal profession, Adam Kilgore of the Mississippi Bar will be giving away free, round-trip plane tickets to the North Pole where they keep their bar complaint forms (which are NOT available online). If you don't want to go to the North Pole, you can enjoy Brant Brantley's (of the Mississippi Commission on Judicial Performance) free guided tours of the quicksand field over by High Street where all complaints against judges disappear. If for some reason you are unable to control yourself, never fear; Judge Houston Patton will operate his jail where no lawyers are needed or allowed as you just sit there for minutes... hours.... months...years until he decides he is tired of you sitting in his jail. Do not think Judge Patton is a bad judge however as he plans to serve free Mad Dog 20/20 to all inmates.

Trollfest '09 is a pet-friendly event as well. Feel free to bring your dog with you and do not worry if your pet gets hungry, as employees of the Jackson Zoo will be on hand to provide some of their animals as food when it gets to be feeding time for your little loved one.

Relax at the Fox News Tent. Since there are only three blonde reporters in Jackson (being blonde is a requirement for working at Fox News), Megan and Kathryn from WAPT and Wendy from WLBT will be on loan to Fox. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both and a torn-up Obama yard sign will entitle you to free drinks served by Megan, Wendy, and Kathryn. Get your tickets now. Since this is an event for trolls, no ID is required. Just bring the hate. Bring the family, Trollfest '09 is for EVERYONE!!!

This is definitely a Beaver production.


Note: Security provided by INS.

Trollfest '07

Jackson Jambalaya is the home of Trollfest '07. Catch this great event which promises to leave NE Jackson & Fondren in flames. Sonjay Poontang and his band headline the night with a special steel cage, no time limit "loser must leave town" bout between Alan Lange and "Big Cat"Donna Ladd following afterwards. Kamikaze will perform his new song F*** Bush, he's still a _____. Did I mention there was no referee? Dr. Heddy Matthias and Lori Gregory will face off in the undercard dueling with dangling participles and other um, devices. Robbie Bell will perform Her two latest songs: My Best Friends are in the Media and Mama's, Don't Let Your Babies Grow up to be George Bell. Sid Salter of The Clarion-Ledger will host "Pin the Tail on the Trial Lawyer", sponsored by State Farm.

There will be a hugging booth where in exchange for your young son, Frank Melton will give you a loooong hug. Trollfest will have a dunking booth where Muhammed the terrorist will curse you to Allah as you try to hit a target that will drop him into a vat of pig grease. However, in the true spirit of Separate But Equal, Don Imus and someone from NE Jackson will also sit in the dunking booth for an equal amount of time. Tom Head will give a reading for two hours on why he can't figure out who the hell he is. Cliff Cargill will give lessons with his .80 caliber desert eagle, using Frank Melton photos as targets. Tackleberry will be on hand for an autograph session. KIM Waaaaaade will be passing out free titles and deeds to crackhouses formerly owned by The Wood Street Players.

If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

This is definitely a Beaver production.

Note: Security provided by INS
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