Actuarial Outpost
 
Go Back   Actuarial Outpost > Actuarial Discussion Forum > Finance - Investments
FlashChat Actuarial Discussion Preliminary Exams CAS/SOA Exams Cyberchat Around the World Suggestions


Finance - Investments Sub-forum: Non-Actuarial Personal Finance/Investing

Reply
 
Thread Tools Search this Thread Display Modes
  #41  
Old 09-20-2010, 12:28 PM
limabeanactuary's Avatar
limabeanactuary limabeanactuary is offline
Mary Pat Campbell
 
Join Date: Jan 2010
Studying for Anglo-Saxon
Favorite beer: Bass Ale
Posts: 14,142
Default

stupid [and possibly illegal] move from a govt entity:
http://www.tampabay.com/news/politic...s-lost/1122607

Quote:
Three years ago, the state of Florida made bad investments that lost hundreds of millions in value. State leaders blamed the sharks of Wall Street, who they said duped Florida money managers into buying way-too-risky securities.

Chief Financial Officer Alex Sink pushed the state to sue big banks, which she said dumped tainted investments on Florida.

Gov. Charlie Crist demanded a no-holds-barred investigation and named four Wall Street firms that he suspected took advantage of the state.

Attorney General Bill McCollum wondered if there had been fraud and promised help with an investigation.

But no bank was prosecuted, no lawsuit was filed and there was never a full accounting of a financial debacle that could cost Florida governments and taxpayers hundreds of millions of dollars.

Now the St. Petersburg Times has obtained e-mails and internal memos that document a story at odds with the one told by Crist, Sink and McCollum, the elected officials responsible for oversight of the state's money managers.

The securities Wall Street "dumped" on Florida? The records show the state was anything but an innocent dupe; it was an eager partner.
Reply With Quote
  #42  
Old 03-12-2012, 10:34 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 82,921
Blog Entries: 6
Default

http://www.telegraph.co.uk/finance/n...g-scandal.html

Quote:
All of the UK's major banks, including Barclays and HSBC, as well as taxpayer-backed lenders Lloyds Banking Group and Royal Bank of Scotland, are facing legal action which could lead to billions of pounds of damages for small and medium-sized businesses.
The businesses claim the banks profited at their expense from pushing them to take out highly complex interest rate derivatives.
....
The allegation is that banks sold unnecessarily complex and inappropriate interest rate swap products to small business customers.
....
Prof Michael Dempster, Professor Emeritus at the University of Cambridge's Centre for Financial Research and an expert on derivatives, designed many of the computer systems used by banks to price derivatives, such as interest swaps.

He said he was shocked by the products banks had sold to SMEs. "I liken it to going to bet on a horse race having fixed the result," he said. "You're not guaranteed to win, but you have a heck of an edge on the punters."

Many banks have already settled cases involving claims of interest rate swap mis-selling. Last year, HSBC is thought to have paid 250,000 to settle a case brought by a Scarborough chip shop, while RBS is also understood to have settled a case earlier this year.

Prof Dempster believes the size of claims faced by banks is likely to end up in the billions of pounds.

"I think this could be at least the same size as PPI [payments protections insurance]," he said, referring to the mis-selling of the products to retail customers.
Many of the claimants spoken to by The Sunday Telegraph said they were not aware of the significant costs attached to the products that were supposed to protect loans from upward movements in interest rates.

When interest rates plunged after the 2008 financial crisis, businesses were left facing significant bills, with some of the derivatives costing business owners hundreds of thousands to millions of pounds.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #43  
Old 03-12-2012, 04:02 PM
WWSituation's Avatar
WWSituation WWSituation is offline
Member
SOA
 
Join Date: Sep 2001
Location: philadelphia, pa
Favorite beer: Parabola
Posts: 2,834
Default

Harvard betting rates will rise isn't different from what every pension plan in America did. One did it by entering swaps, the other did it by actively not doing so.
__________________
Quote:
Originally Posted by Duffer View Post
We, the actuarial profession, did several things badly.

1. Pandering - we marketed ourselves as finding clever ways to give the public pension sponsors something for nothing
2. Ignored consequences - we found clever ways to allow politicians to ignore the true costs of benefit increases, like negative amortization of losses
3. Low standards of measurement - GASB had the most simple-minded of standards, and is now only going half-way to raise the standard.
Reply With Quote
  #44  
Old 11-11-2013, 03:42 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 82,921
Blog Entries: 6
Default

Followup on that original post:
http://ai-cio.com/channel/RISK_MANAG...s_Go_Sour.html

Quote:
(November 11, 2013) — Harvard University has spent more than $1.25 billion unwinding debt derivatives since 2008, according to its own figures.

The most recent payments to exit the interest rate swaps were linked to around $942 million of existing and future debt, the Cambridge, Massachusetts-based university, which has an endowment of $30 billion, said in a financial report.

The majority of the swaps, which assumed that interest rates would rise, were taken out in 2004, when Lawrence Summers, now President Barack Obama’s economic adviser, led the university.
....
The situation became so bad that the school was forced to borrow money in 2008 to terminate some of the swaps.

The costs resulting from unwinding the derivatives were $497.6 million in fiscal 2009; $277.6 million in 2011; and $134.6 million in 2012, according to a Bloomberg report.

Harvard had an operating deficit of $34 million for the past year. This marked an increase from $7.9 million the earlier period, but was still a relatively small proportion of its $4.2 billion 2013 revenue.

In moves designed to stabilize its finances, the university raised holdings in cash and liquid investments outside its endowment to $1.5 billion from $1.3 billion at the end of the earlier the 2011 fiscal year, Bloomberg reported.


Some hedging. Sounds highly intelligent, right?

But hey, it's just other people's money. Lucky for Summers, he got booted well before the idiocy came to light.

Not that he would have been booted for losing money - not at Harvard, at any rate.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #45  
Old 11-11-2013, 03:53 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 82,921
Blog Entries: 6
Default

Ah, okay, I got the timeline mixed up.

Here's clarification:
http://delong.typepad.com/sdj/2013/0...one-wrong.html

Quote:
Harvard's Debt Management Committee decides to hedge the risk that interest rates will rise by taking on a huge long-run swap position--thus insulating itself against losses if interest rates rise, but also giving up the gains that would otherwise accrue if interest rates were to fall. Summers does not overrule but rather approves the DMC.

Summers resigns the Harvard Presidency in mid-2006.

Successors Bok and Faust cancel the expansion.

Harvard's DMC does not liquidate its swap position now that it is no longer a hedge, and so turns it into a very large directional bet that Treasury interest rates are going to go up.

In late 2008, in a panic during the panic, Harvard's DMC sells the position at the bottom, when it is worth the least.

The decision to change a hedging position to a speculative one was done after Summers left the Harvard presidency.

Of course, he was still around Harvard as a faculty member at the time the project being hedged was canceled, but maybe nobody asked him his opinion on the swap.
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #46  
Old 01-28-2014, 07:55 PM
twig93's Avatar
twig93 twig93 is offline
Member
SOA
 
Join Date: Jun 2003
Posts: 28,620
Default

Catching up on an old story...

Quote:
Originally Posted by bdschobel View Post
Wow. Lucky they have so much money -- even if not as much as they used to have.

Bruce
Biggest endowment in the world (or at least it used to be). It's silly that they think they have to make so many cuts. Just sell off some of their other (considerable) assets to fund short-term spending needs and exist on a smaller endowment for a while until they spawn the next Bill Gates or Mark Zuckerberg.

Quote:
Originally Posted by Loner View Post
I was expecting this to be about this story:
http://www.nytimes.com/2009/10/09/ed...arvard.html?hp

Headline:
Leaner Times at Harvard: No Cookies
That's really cheap of them to stop serving hot breakfast. I mean my state school didn't have an endowment 1/10th as big as the *reduced* endowment of Harvard and we still had hot breakfast. For $45,000 a year, I'd expect hot breakfast too!

BTW, I spent a summer term at Harvard when I was in college. The food there is weird. They'd have amazing spanokopita one day, but the next day they couldn't figure out how to cook spaghetti noodles to save their lives. How can one possibly get spanokopita right and spaghetti noodles wrong???


Quote:
Originally Posted by campbell View Post
Harvard explicitly warned against doing what they did:
http://www.boston.com/news/local/mas...t_investments/



Lots more at link.

You would think they didn't need to be told not to bet the milk money, but the stupidity of "smart" people is pretty incredible to those who have never dealt with it first-hand.
There are some pretty cocky people at Harvard. (Along with some really nice and really smart people.) Moving a professor's office across the Charles River to Allston is roughly on par with stealing his firstborn child.
__________________
Originally Posted by Gandalf
The thing that is clearest is twig's advice
Reply With Quote
  #47  
Old 01-28-2014, 08:22 PM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 82,921
Blog Entries: 6
Default

let's just say I know a lot of people who "went to college in Boston"

And no, they're not as smart as they think they are
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #48  
Old 06-18-2014, 08:11 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 82,921
Blog Entries: 6
Default

CHICAGO

http://www.suntimes.com/m/28137400-7...l#.U6F6NPldVif

Quote:

Already facing a host of financial worries, Mayor Rahm Emanuel’s administration could be stuck with a nearly $200 million tab as a result of betting heavily on risky interest-rate “swaps” under former Mayor Richard M. Daley.

The deals required the city to maintain a certain credit rating, but the rating has fallen since the Daley administration made them, putting the city at risk.

The financial institutions involved could terminate the deals and demand immediate payment if the ratings agency Moody’s Investor Service drops the city’s credit rating again — which it has warned it will do unless Chicago’s underfunded pensions are dramatically reformed.

Taxpayers could end up owing bankers and other financial institutions including Wells Fargo and Loop Capital Markets $110.4 million if Moody’s drops its rating for Chicago by one notch, according to documents reviewed by the Chicago Sun-Times. Falling two more levels could cost the city another $88.5 million.

Moody’s dropped the city’s bond rating three notches last July. Then, it lowered the rating again, in March, by another notch, to the current Baa1 status.

Most of the swap agreements — which date as far back as 1999 — peg the termination threshold to any drop below Baa1.

In announcing the latest drop, Moody’s said its outlook for Chicago was “negative,” warning that only new revenues and reduced costs could avert further ratings declines.

Another ratings drop would present the city of Chicago with the kind of problem Detroit experienced before it fell into bankruptcy. In 2012, Detroit’s bond rating went below the level it needed to maintain under its swap deals, giving bankers the right to claim about $350 million from the Michigan city. The bankruptcy judge in Detroit’s case recently whittled what he said the city would have to pay the bankers to $85 million, after rejecting two larger settlement figures that city officials and bankers there had agreed on.

OH JEEZ

Now I see yet another reason Daley turned tail and bravely ran away
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
  #49  
Old 06-18-2014, 08:44 AM
DixieFlyer's Avatar
DixieFlyer DixieFlyer is offline
Member
SOA AAA
 
Join Date: Mar 2007
Favorite beer: Four Peaks Kiltlifter
Posts: 2,461
Default

Quote:
Originally Posted by campbell View Post
the brilliant Larry Summers strikes again
__________________
Don't steal; the government hates competition.
ΜΟΛΩΝ ΛΑΒΕ
Reply With Quote
  #50  
Old 06-18-2014, 08:46 AM
campbell's Avatar
campbell campbell is offline
Mary Pat Campbell
SOA AAA
 
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
Favorite beer: Murphy's Irish Stout
Posts: 82,921
Blog Entries: 6
Default

Quote:
Originally Posted by DixieFlyer View Post
the brilliant Larry Summers strikes again
Actually, it wasn't Summers' fault, but idiotic decision-making by the people after he left. I thought we hashed it out in this thread, but I guess I did it elsewhere
__________________
It's STUMP

LinkedIn Profile
Reply With Quote
Reply

Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off


All times are GMT -4. The time now is 07:27 AM.


Powered by vBulletin®
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.
*PLEASE NOTE: Posts are not checked for accuracy, and do not
represent the views of the Actuarial Outpost or its sponsors.
Page generated in 0.54287 seconds with 9 queries