Tuesday, March 01, 2011

Traders get innovative and New Jersey retirement rates

Only on Wall Street could you devise a plan to trade something that no longer exists.

Wall Street Bets on Debt that Doesn't Exist

"Banks and hedge funds are trading credit-default swaps, which make payments to holders of General Motors bonds in the event of a default. But GM canceled $40 billion of debt in bankruptcy and has pledged to cut its remaining $4.6 billion bank loan to the bone this year.

That is merely a technicality for the banks and hedge funds that have been actively trading the CDS."

"Sure, having CDS without debt looks odd, and people may balk because credit derivatives were at the center of the AIG collapse, but that doesn't change the fact that CDS prices are the de facto benchmark used to measure the state of the credit market," said Kevin McPartland, senior analyst at research firm TABB Group."

I'd like to buy some dodo bird futures and sell some T-Rex March 2015 calls. Do you think Goldman could make a market in that?


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New Jersey workers scared into retirement?

"More than 20,000 police officers, firefighters, teachers and other public employees put in their retirement papers last year as momentum was building for sweeping health and pension reform in Trenton, state figures show.

That is a 60 percent jump from 2009 retirements and the highest in at least a decade, according to the Division of Pension and Benefits."

Retirements among police and fireman jumped 45% while teacher retirements jumped 95%. This is a bit misleading however, because retirements dipped in 2009 (in the heart of the recession) and have rebounded above previous levels so it looks like a giant jump in the rate of retirement.

Cheers!

1 comment:

Anonymous said...

A couple of government employees I know did the same thing. They were worried that the state would make them start paying for some of their health insurance in retirement and figured that if they retired at a time when retirees pay for none of their health insurance costs they would be safe. I haven't had the heart to tell them that the rules could be changed for retirees too.

It's too bad because they could still be earning retirement credits of two percentage points per annum, plus they would have ended up with a higher final average salary at retirement.