This is a time to get together and eat and talk , just time for our friends. There is no format, dues, agenda etc., We can meet anytime or place we decide, picnic pot luck, local food, anything we want to, even invite speakers. But for now please show up, eat and talk to like minded friends. No need to RSVP just stop by and eat. email Trana if you like.
Anybody got anything that's interesting for me?
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|Democracy In Action|
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|Comedy From The North Dakota Capitol Building|
|Written by Chet|
I hope you caught the section of an AP article making the rounds earlier this week. I missed it, but a link was forwarded to me by a friend who did some worthwhile analysis. First, the clip, then the analysis:
OIL TAX TRUST FUND
North Dakota's oil tax "Legacy Fund" could hit $1 billion this month and a state board now is recommending that half of the fund's assets be shifted to the stock market and other investments.
North Dakota voters approved the fund in 2010 and it's been rising faster than predicted with booming oil production. None of the money can be spent until 2017, and even then it takes a two-thirds vote of the Legislature to get into it.
March deposits were about $87 million, bringing the fund's total to $927 million, according to Darren Schulz, the interim chief investment officer of North Dakota's Retirement and Investment Office.
Oil revenue began gushing into the fund only since September 2011 and analysts initially estimated it would have a $618 million balance when the state's current two-year budget period ends on June 30.
Revenue from the fund has been invested mostly in short-term, low-risk and low-return U.S bonds, guaranteed by government agencies, Schulz said. But annual earnings from the fund, about 1.6 percent last year, is barely keeping pace with inflation, he said.
The seven-member Legacy Fund advisory board, created by the Legislature, now wants to build on the fund with a broader investment policy by placing 50 percent of the money in stocks and other types of investments.
The new strategy is estimated to bring an annual return of 6.35 percent, but will still be in line with the state's conservative investment policy, North Dakota Treasurer Kelly Schmidt said.
"This allocation will give the fund an opportunity to preserve principle for future generations and maintain purchasing power," she said.
North Dakota's Investment Board, which supervises the Retirement and Investment Office and oversees state and local government employee pension funds, is expected to adopt the Legacy Fund advisory board's recommendation later this month.
First things first: I'm not a math professor; I'm just a caveman lawyer. The math in this might be a little over my head. But I'm gonna do the best I can with my limited math brain capacity.
First, let's assume Kelly Schmidt is quoted accurately. If so, she claims the state’s “conservative investment policy” [massive amount of LOL on my end after reading that] would have the Legacy Fund realizing a 6.35% return rate if HALF of it were invested in the stock market. This is coming from Kelly Schmidt, mind you. She's the person who tripled the investment fees for the veterans post-war trust fund while, in real terms, going from positive to negative rates of return at the same time.
And then the North Dakota State Investment Board dude -- Darren Schulz -- says in the article that last year the Legacy Fund realized a 1.6% rate of return. Now, without drilling down any further into the underlying numbers, consider these two concerns:
(1) Is there any chance Kelly Schmidt and Darren Schulz are on crack?
(2) If 50% of the Legacy Fund is going to be placed in the casino investments the North Dakota State Investment Board (SIB) is famous for (with 2 to 3 times the fees over industry averages, 100% stock fund turnovers [i.e. gambling not investing], disguising junk bonds and risky alternative investments as normal low risk investments when reporting their investments to the public employees so its consultant, Callan, can charge more fees, etc., etc., etc. -- then that means 50% of the Legacy Fund will stay in the 1.6% rate of return range – basically T-bills and muni-bonds - and the other 50% will go to the market as managed by Kelly's buddies in retail investment houses who send her illegal campaign contributions.
So, for the “new strategy” to get a total fund rate of return average of 6.35% they're claiming the Legacy Fund will get, that would mean that the 50% that will be going into stocks “and other types of investments” will have to get an average rate of return of 10.2% so the average of the 50% in T-bills and the 50% in stocks works out. (10.2%/1.6% = 6.375%)
Now, to get 10.2% return on investment with the nonsensically high fees SIB pays for no reason, the “new strategy” needs a 12-13% gross rate of return on the 50% of the Legacy Fund going into the stock market. Let’s compare that to the S&P 500. From January 1st, 2000, until December 31st, 2012, the S&P 500 grew at .95% annual average (inflation adjusted), and 3.65% (non-inflation adjusted). [And I gotta tell you I found a variety of different sources for these numbers, and they were all inconsistent with one another. But let's just take these numbers and run with them.]
In a nut shell: The “new strategy” for the Legacy Fund is to beat the market by 3 to 4 fold (3.65% market average and they need 12-13% to get a total Legacy Fund average of 6.35%) Since nobody beats the market over the long term, and all academic reviews of the high fee strategies SIB uses prove they don’t beat the market - we are asking the people of our state to lay our Legacy Fund money into the hands of people that think they can have triple the return of the stock market with half our money.
Makes sense, right?
Which brings us back to question Number One again: ARE THESE PEOPLE ON CRACK???
The retail investment consultants pushing this are already shopping for new yachts.