Pension fund return assumptions are not a matter of opinion.

I came across this letter written by Curtis Hutchins, the President of the Retired Educators Association of Minnesota.  Mr Hutchins argues against a reduction in the pension return assumption for the state pension fund.  In the letter he states:

Some believe pension fund investment returns should be held to more of a “risk free” rate of return — such as the Treasury yield, which is about 4 percent. The debate over what is an appropriate investment return assumption is largely a philosophical one between optimists and pessimists.

I'm afraid that Mr Hutchins is completely wrong here.  Return assumptions are not a philosophical debate that depends on whether you are an optimist or pessimist.  In fact your opinion about future returns shouldn't influence your return assumptions at all - because it is just that - an opinion!

The risk free rate is more appropriate rate to use because the liabilities of the fund are risk free.  They are promises to the current and future retirees on Minnesota.

The use of a riskless rate to value a riskless liability is based on simple finance.

The Facebook halo effect...

OK I didn't see this one coming ... LNKD spikes up on Facebook's IPO filing.

Facebook IPO filing details...

Some details on the big one.  The number that stuck out to me was that FB made $1 billion last year.  That seems a lot, but remember that the company is being pegged at a valuation of $100 billion.  That implies a trailing PE of 100.  Ouch - that's a sky high valuation for a huge company.

Analytics

Analytics - the analysis of large amounts of data is the hottest thing since sliced bread these days.  At NCSU we've had an Advanced Analytics Masters for a few years.  In fact we were one of the first schools to offer one.  The degree is very popular - as this recent blog post on the NYT site indicates.

I've taught the "Financial Analytics" module in the NCSU program for several years, although due to other commitments, this will be my last year.

The trend in Analytics makes it pretty clear that to succeed in the business world today, students must be comfortable with data, data manipulation and data analysis using statistics.  Programming and excel skills are always good to have.  And of course you need all the other stuff as well (especially finance).

A Facebook IPO explainer.

Everything you wanted to know about Facebook's IPO in a nice easy to read format.

Nicely done.

(edited to put in correct link)

GRPN LNKD update on the eve of Facebook's filing.

As all finance pundits eagerly await the IPO filing of Facebook, I thought it might be worth just checking in on a couple of the high profile IPOs from 2011 - Groupon (GRPN) and LinkedIn (LNKD).

GRPN -18%.
LNKD -23%.

I'm sure Facebook will do a lot better.

Who's to blame for CEO pay? It's the economists of course.

At least so says the Guardian. 

While the article is utter rubbish, it does illustrate how little you need to know about finance and economics to get a job writing about finance and economics for a major newspaper.