NC Pension Fund and Facebook.

Unfortunately the State of NC bought a load of Facebook stock at the IPO.  I have no idea why - it seemed to me and to many others that this IPO was overpriced.

Now the State Treasurer is suing Facebook and the underwriters of the stock claiming that they were mislead.

I have a couple of observations on this:

First if the Pension Fund was indexed, we wouldn't have this issue. An indexed portfolio wouldn't be jumping into overpriced IPOs.  I've argued before that indexing this and most pension funds is the way to go.

Second, there are questions being raised about potential conflicts of interest.  I'm in no position to make judgments either way on this, except that I think that more transparency is always the best answer.

1 hour course for NCSU MBAs

This is only of interest to NCSU MBA students.   I'll be teaching a one hour course on asset allocation this fall.   Details are here.
Contact me directly if you are interested.

The state of state pension funds.

Many state pension plans are in trouble, but while 34 states are less than 80% funded, North Carolina is apparently well funded.  I'd argue that NC could do a lot better by reducing the fees paid to managers from about $300 million per year.

It's also worth noting that being 100% funded doesn't mean that the fund will meet liabilities, it just means that the present value of liabilities equals the present value of the investments.  The key here is that the same discount rate is used (incorrectly) to find both present values.  All funds should use a lower discount rate to value the liabilities, which will result in the liabilities having a higher value.

Therefore just because a fund says that it is 100% funded, it doesn't mean that it really is.

HT: Newmark's Door.

A $440 Million computer glitch.

Ouch - a bad bit of software cost Knight Capital nearly half a billion when they accidentally sold all the stocks that they had bought the prior day.

As they say, to err is human, but to really screw things up you need a computer.

The economic policy debate is a sham.

Great article that discusses what economists think about the major policy issues that our (non-economist) politicians are debating.

89 business cliches

I could barely get through these because they are so painful.  But you might use them in your next game of buzzword bingo.

HT: George.

Some good news about state finances (one state in particular).

These days we hear a lot about the sorry state of state finances.  Usually such discussions involve mention of  California which seems to have taken financial dis-functionality to a new level.  But here's a good news story about my own state; North Carolina.

Municipal finances (those of towns, cities and counties) in NC are generally in pretty good shape largely because of a little known organization called the "North Carolina Commission".  The job of the Commission is to basically stop the finances of the municipalities in the state from running off the rails.  And by all accounts they do a good job.  Read about it here.   The key to the success of the Commission is that it deals with problems before they get out of control, rather than trying to clean up messes once they've been made.   Sounds pretty sensible really.

HT:Ron at investorcookbooks.blogspot.com