One issue underlying the bill I discussed yesterday is CalPERS long-term solvency. CalPERS has estimated that it has as assets now under management only about 71% of what it will need to make the pension payments due to workers of the state and local governments. That isn't a disastrous shortfall. After all, the payments aren't all due tomorrow. No 72% of them are due tomorrow. And it has investments out that are earning money as we speak. What you don't want to happen, of course, is for retirees to get paid by the revenue from today's workers. The retirees should be paid from the invested value of what they paid into the system, and today's workers should be building up their own future returns. The 71% number is low enough to make managers properly uncomfortable. So it is natural that they look for other avenues to raise money. Even direct non-bank lending. But here we get to the reason there IS a public records act requiring transparency. It is there out of a s...
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I've written of Amartya Sen in recent days. I think I'll return to that well today, drawing on his 1999 book, Development as Freedom. I will do so without rushing in to agree or disagree with particular points, though I'm afraid I will comment along the way on Sen's prose style. Freedom has two distinct roles in the life of a developing nation, the constitutive role and the instrumental role. In the words of Amartya Sen, freedom is both a constituent in the good life and an instrument kn economic progress. Freedom, especially in its instrumental role, includes for Sen "the opportunities that individuals respectively enjoy to utilize economic resources for the purpose of consumption, or production, or exchange." His prose style here is clunky and academic. The use of "utilize" where the word "use" would work is an example. But I'm picking up what he's laying down. A little later, "The availability and access to finance...
Debt is traded very differently from most corporate equity. The secondary market for bonds gets along without the big listed exchanges that provide a central narrative in the world of corporate stock. Indeed, for a long time trades were negotiated and agreed upon through telephone calls. In the 1990s, it occurred to various pioneers that “we could use the internet for this” and they tried to create an exchange-like model, an anonymous central limit order book (CLOB). A company called Trading Edge created BondLink for this purpose. Perhaps a related development: in 1998, the chairman of the Securities and Exchange Commission at the time, Arthur Levitt, said in a speech at the Media Studies Center in New York, “Investors have a right to know the prices at which bonds are being bought and sold. Transparency will help investors make better decisions, and it will increase confidence in the fairness of the markets.” Well, more transparency is always greater than less if the d...