Thursday, May 26, 2016

R.I.P. Deflation?

Amey Stone of Barron's reports, Deflation Is Dead, Buy TIPS over Treasuries:
BlackRock’s global chief investment strategist Richard Turnhill is worrying a lot more about inflation lately. His weekly commentary is titled, “Why deflation is dead,” and argues investors should own Treasury Inflation-Protected Securities (TIPS) as a hedge and also because they are likely to do better than Treasuries.

Higher energy prices is a big reason why he thinks more inflation is coming. But he has a lot of additional reasons, too. He explains:
Our analysis suggests rising U.S. inflation pressures will persist, as factory-gate price increases are passed on to consumers. It is not just the rebound in energy prices pushing inflation higher. An appreciating U.S. dollar is abating as a headwind. Prices of more stable service-based components of the CPI are also rising. Wages, too, are moderately increasing, as are survey-based consumer inflation expectations.
TIPS price in inflation of just 1.4% over the next 10 years. An exchange-traded fund that tracks the TIPS market, iShares TIPS Bond ETF (TIP), is up 4% year-to-date. It fell in the past week, however, as investors judged that if the Fed raises rates this summer, it would lower the risk of inflation and might even cause deflation.

Turnhill’s view is very different. He concludes:
The odds of the Fed increasing rates this summer have increased, although we see only one to two rate increases this year amid slow U.S. growth. We are cautious on duration, but rising inflation means owning TIPS in lieu of nominal Treasuries can be an important hedge for fixed income portfolios.
ValueWalk also reports, A Chart Showing Why Deflation Is Dead:
U.S. deflation is no longer an imminent risk. Global Chief Investment Strategist Richard Turnill’s chart of the week helps illustrate why.

U.S. deflation is no longer an imminent risk. This week’s chart helps illustrate why (click on image).

U.S. inflation has been picking up, following a prolonged period of subdued price rises, as evident in the chart above. The U.S. Consumer Price Index (CPI) in April posted its largest increase since February 2013. The inflation upturn is even more pronounced in forward-looking prices-paid surveys, such as the Institute for Supply Management’s Price Index, our analysis suggests. A greater number of purchasing manager survey respondents reported paying more for products and services in March and April, as the chart above shows.

We see the inflation upturn continuing over the near term. Energy supply-demand fundamentals are turning from a headwind into a tailwind for inflation. Oil supply has tightened, and demand is picking up, primarily out of China and India. This suggests current prices look increasingly sustainable, unless we get a significant reopening of idled shale-oil production. It points to energy’s downward pressures on inflation beginning to subside, in line with the view expressed in hawkish Federal Reserve (Fed) meeting minutes released last week.

Our analysis suggests rising U.S. inflation pressures will persist, as factory-gate price increases are passed on to consumers. It is not just the rebound in energy prices pushing inflation higher. An appreciating U.S. dollar is abating as a headwind. Prices of more stable service-based components of the CPI are also rising. Wages, too, are moderately increasing, as are survey-based consumer inflation expectations.

Bottom line: The odds of the Fed increasing rates this summer have increased, although we see only one to two rate increases this year amid slow U.S. growth. We are cautious on duration, but rising inflation means owning Treasury Inflation Protected Securities (TIPS) in lieu of nominal Treasuries can be an important hedge for fixed income portfolios. Read more market insights in my weekly commentary.
So is Richard Turnhill right? Is deflation dead? Have policymakers succeeded in resurrecting global inflation? Is deflation the dog which has not barked?

Of course not, deflation is very much alive everywhere outside the United States and the Fed and other central bankers are desperately worried that if it becomes entrenched, the global economy is going to fall into a long deflationary slump.

I know, everyone is getting excited as US crude breaks above $50 for first time in seven months and some are even worried the Fed could be blindsided by 1970s style stagflation. Some geopolitical analysts are even claiming that China thinks the US will default via inflation.

I'm afraid to rain on the inflation parade but the global reality is deflationary headwinds are picking up steam. Paul Hannon of the Wall Street Journal reports, Eurozone Slides Back Into Deflation:
The eurozone slipped back into deflation in April despite a stabilization in energy prices, underlining the difficulties the European Central Bank faces as it struggles to boost consumer prices.

The European Union’s statistics agency on Wednesday confirmed a preliminary estimate that showed consumer prices were 0.2% below their year-earlier levels in April, making it the second month this year in which the eurozone was in deflation.

The decline in consumer prices won’t have come as a surprise to the ECB, which had expected such an outcome during the first half of this year. But the reasons for the slide back into deflation have caused some fresh anxiety among policy makers.

“I am more worried about deflation,” ECB governing council member Ignazio Visco said in an interview with German business daily Handelsblatt published Tuesday. “With this come bankruptcies and very negative effects on the real economy. I believe we still face a concrete deflation risk.”

For much of the three years during which inflation has remained stubbornly below the central bank’s target of just under 2%, falling energy prices have been the main culprit. But energy prices have rebounded after sharp falls in the first two months of the year, and indeed rose slightly during April.

Instead, the main driver of the decline in consumer prices during April was a sharp drop in the rate at which prices for services rose, to 0.9% from 1.4% in March. Some of that likely reflects the timing of Easter, which this year pushed up prices of package holidays and other services in March.

But it may also be a sign of what central bankers call “second-round effects,” when businesses outside the energy sector start cutting their prices to reflect lower costs or falling inflation expectations among consumers. The core rate of inflation—excluding items such as food and energy, the prices of which are set mainly in world markets—fell to 0.7% from 1% in March, hitting its lowest level in a year.

“It will clearly be a very long, hard slog to get eurozone consumer-price inflation back up to the ECB’s target rate,” said Howard Archer, an economist at IHS Global Insight.

The ECB has launched a series of stimulus packages since mid-2014, all in an effort to achieve its inflation target. The most recent, announced in March, included cuts to all its main interest rates, a series of ultracheap loans for banks and an acceleration of its bond purchases to €80 billion ($91 billion) a month.

But the bank’s efforts have been frustrated by lower energy prices that partly reflect weaker growth in a number of large developing economies, as well as the modest pace of the eurozone’s recovery from its debt crisis, now in its fourth year.

“The stabilization in global energy prices since early 2016 raises the bar for additional easing at the next release of the ECB’s macroeconomic projections on June 2, but another rate cut is not out of the question,” said Bill Adams, an economist at PNC Financial Services.

One obstacle to the announcement of new measures is the U.K.’s referendum on whether to remain in the EU or leave, which will be held in June. Either outcome could have significant implications for the eurozone economy.

In an interview with The Wall Street Journal published Wednesday, ECB council member Vitas Vasiliauskas said he favors waiting until autumn before considering any additional policy moves.

“If there will be a need, we will of course do additional measures,” Mr. Vasiliauskas, who also heads Lithuania’s central bank. But “if there will be no need, we will do nothing.”
The Financial Times also reports, Spain PPI deflation worst since financial crisis:
Producer prices in Spain continued to deflate in April, with the biggest drop in almost seven years.

The PPI index fell 6.1 per cent year-on-year in April, the 22nd consecutive month of decline. They had fallen 5.6 per cent in March, but April marks the sharpest pace of contraction since July 2009, in the depths of the financial crisis.

Month on month, prices fell 0.1 per cent, after rising 0.6 per cent in March.

Consumer and producer prices around the world have generally been deflating for the past 18 months, with low oil prices a big driver. However over the long term, deflation erodes corporate profits, leading to layoffs and tighter investment, curbing economic growth.
In Asia, things are going from bad to worse. The Hindu Business Line reports that slowing or declining producer prices are haunting the two major Asian economies, China and India, signalling that the deflation contagion has spread to the developing world as well.

In Japan, Prime Minister Shinzo Abe has decided to postpone a consumption tax increase that was planned for next April, judging it to threaten efforts to pull the world's third-largest economy out of deflation:
Abe conceded earlier in the month that raising the consumption tax to 8% had a bigger-than-expected impact on consumer spending. He has argued repeatedly in parliament that Japan would be worse off after an increase that failed to generate higher revenue. Abe cited the threat to his campaign against deflation as grounds for postponing the rise to 10% the first time.

Japan's economy shrank an inflation-adjusted 0.3% in the fourth quarter of 2015 compared with the previous three months, revised figures show. The initial GDP reading for the first quarter of 2016 showed an annualized 1.7% expansion, but that meager growth was partly the result of an additional day in February due to a leap year. Consumer prices are sinking. And the impact of the Kyushu temblors on consumer and business activity will linger.

The rising yen is threatening corporate Japan's earnings and the stock market's performance. As for the global economy, growth prospects in China and other emerging markets are dimming amid unstable crude oil prices. Nobel laureate Paul Krugman, Joseph Stiglitz and other prominent economists have counseled Abe not to impose a higher tax burden on consumers under such conditions.
In Australia Bloomberg reports, Gloomy Aussie Rates Traders Win as Inflation Forces RBA Rethink:
Australian policy makers and economists are finally seeing the domestic economy through the dismal lens interest-rate traders have been using for the past year.

Swaps have been indicating for that long that the Reserve Bank of Australia would cut its benchmark rate at least once if not twice over 12 months, even as most economists saw the central bank sitting at a record-low 2 percent. Traders were proved right May 3 when Governor Glenn Stevens cut the policy rate to 1.75 percent. Now, markets and the majority of economists agree that a move to 1.5 percent is likely with JPMorgan Chase & Co., Commonwealth Bank of Australia and Morgan Stanley more bearish still.

Inflation was “a bit too low” Stevens said Tuesday, adding that and the central bank’s framework of targeting annual consumer-price gains of 2 percent to 3 percent had been a successful tool in deciding policy rates, though it wasn’t rigid. Swaps markets predict the low-point for the Australian benchmark will be about 1.4 percent in April next year, said Jarrod Kerr, a senior rates strategist at Commonwealth Bank, which is calling for a reduction to 1.25 percent by the end of 2016.

“The linkages between international and domestic inflation are a lot stronger these days and global inflation expectations are a lot lower,” Kerr said. “The fact that the RBA capitulated on its forecasts suggests to us that they are willing to do more to get inflation higher. The risk is more toward 1 percent than that they just do another cut and call it quits.”
In Canada, the inflation rate rose to an annual rate of 1.7 per cent in April as higher prices for food and shelter contributed to a higher cost of living but the Bank of Canada announced that it is maintaining its target for the overnight rate at 1/2 per cent, saying Alberta's wildfires will hurt the economy.

In her comment looking at why the Bank of Canada stood pat on rates, Sherry Cooper, Chief Economist of the Dominion Lending Centres, notes massive capital outflows from China are sustaining housing markets around the world, especially in Canada and the United States:
The media continue to put the spotlight on the Vancouver and Toronto housing booms and the role played by foreigners to drive up prices. Affordability issues are of great concern and questions continue to arise regarding the sustainability of the housing bubble.

I am currently researching the viability of continued housing demand by the Chinese given the government’s 2015 introduction of capital controls, which limits capital withdrawal to the equivalent of $50,000 (U.S. currency) per person. I will detail my findings in another report, but suffice it to  say China’s capital outflow has surged in recent months, notwithstanding these controls. There are a number of ways to circumvent the rules and the penalties are tiny. The Chinese government is simply not enforcing the controls and the continued devaluation of the Chinese yuan continues to trigger massive outflows (see Chart below). Much of that money is moving to housing in Toronto and Vancouver, as well as to Australia, New Zealand and the United States. The Chinese are now the number-one foreign purchaser of U.S. residential real estate, surpassing Canadian inflows this year. This is stimulating the housing markets especially in New York, Los Angeles, San Francisco and Seattle. Chicago, Miami and Las Vegas are also seeing significant investment.

The Canadian government and regulatory response to this foreign inflow of money is evolving. The media have recently highlighted the potential for money laundering and the lax enforcement of of anti-money laundering initiatives in the real estate sector. But it appears that most of the Chinese purchase of Canadian housing is not for money laundering purposes, meaning garnered through illegal activity or to support terrorism.

More on this to come.
There is a lot of money laundering going on in Canada and elsewhere but Sherry Cooper is right, it's not the main driver of capital outflows out of China. Chinese are worried about their future and their currency depreciating, impacting their purchasing power.

And if Soros is right and a crash and deflation ravages China, there will be a lot less money available to propel housing markets in developed economies much higher and this will hit many bubble markets extremely hard.

If you ask me, it's the global deflationary wildfires that really worry Bank of Canada Governor Stephen Poloz and other central bankers around the world. 

But BlackRock’s global chief investment strategist Richard Turnhill says deflation is dead and he's not alone. I hear a lot of strategists claiming that there will be an inflationary pickup in the near term and some think it will possibly last years.

I think they are all wrong, confusing cyclical swings due to currency moves, and if you look at the US bond market, it's yawning too at all these foolish forecasts of a pickup in inflation. I know, oil just crossed the "psychologically important $50 mark," the "US housing market is on fire," everyone is getting ready for "the Fed to raise rates" at least once, but I remain highly skeptical as I see no clear evidence of a global recovery (quite the contrary) and still think the dumbest thing the Fed can do is raise rates (it will heighten global deflation).

The main reason why US inflation picked up in recent months was because of the weaker US dollar. That is it, nothing more fundamental. Outside the US, deflationary pressures are picking up and this will force central banks to do more stimulus to get their economies out of their deflation rut. This is bullish for the US dollar which is why I see it rallying in the second half of the year.

And as I stated in my comment looking at top funds' activity for Q1 2016:
The rising USD should provide relief in terms of deflationary pressures in Asia (except China which pegs the yuan to the USD) and Europe but it also means lower commodity and gold prices. It also means lower import prices for the US which will lower inflation expectations there, effectively importing deflation into that country.
My best advice remains to focus on the big picture which is DEFLATION. This is why I remain bullish bonds (TLT) and to a lesser extent high dividend sectors. The problem with the latter which are made up of utilities, REITS, telecoms and staples is that they ran up too much and have become very crowded. Also, any potential rise in rates will hurt these sectors as they are very interest rate sensitive.

In terms of risk trades, I still trade biotech shares (IBB and XBI) which got slaughtered this year and are coming back strong even if concerns over Valeant (VRX) continue to weigh on the sector.

So, when people ask me my Long/ Short macro trade for the second half of the year it's to go long biotechs (IBB and XBI) and short Metals & Mining (XME), Energy (XLE), and Emerging Markets (EEM).

Of course, if things get really bad, all sectors are going to get slammed hard, especially high beta biotechs, and the only thing that will save your portfolio are good old government bonds (TLT).
That is US nominal Treasury bonds, not TIPS! But if you believe in fairy tales on inflation and global economic growth, by all means, buy the garbage that Wall Street is feeding you about deflation being dead. I'm not buying it and neither is the US bond market.

Below, Chris Verrone, Strategas Research Partners, takes a look at crude oil charts and what stands out in the energy sector. He thinks investors should fade the oil rally and I agree, there may be a little more upside but there's plenty of downside and energy, metal and mining stocks are already diverging from oil prices.

Second,  with the Chinese yuan sliding, Rich Ross of Evercore ISI and Max Wolff of Manhattan Venture Partners discuss the Chinese currency’s importance to global markets with Brian Sullivan. They also discussed whether the market could be poised for a breakout (watch third clip).

Lastly, Gary Schilling, President of A. Gary Shilling & Co and author of The Age of Deleveraging, gave a very interesting presentation on how to make money in a world of deflation.

Deflation is looming and will enhance Shilling's investment strategies. They focus on first, owning Treasury bonds which are also the world's safe haven. Second, owning the US dollar which is also a refuge in troubled times and benefits from almost every other currency devaluing against it. Finally, shorting oil and other commodities that suffer from excess global supply and deficient demand.

Wednesday, May 25, 2016

Chicago's Pension Patch Job?

Hal Dardick of the Chicago Tribune reports, Mayor floats plan to fix city's smallest pension fund:
Mayor Rahm Emanuel on Monday floated a new idea to fix the city's smallest government worker pension system, one that he hopes will become a model to address far greater financial woes in the largest retirement fund.

Under the plan, both taxpayers and newly hired city laborers would pay more toward pension costs, and in return, workers could retire two years earlier.

But the Emanuel administration declined to say precisely how much money such an approach could save, and the mayor does not plan to press state lawmakers for approval during the final scheduled week of spring session.

City officials hope the plan would pass muster with the Illinois Supreme Court, which in March struck down an earlier Emanuel plan aimed at addressing the money shortfalls in pension funds covering laborers and municipal employees.

What "we want is a concrete and sustainable funding path that's not going to get caught up in any legal process, and if there should be some sort of lawsuit on any of this, this is extremely strong, and should not put us in a position of two years of uncertainty like we were" on the previous plan, said Michael Rendina, senior adviser to the mayor.

The Emanuel administration provided an outline of the plan Monday. Starting next year, newly hired employees would pay 11.5 percent of their wages toward retirement, compared with 8.5 percent today. Employees hired from 2011 to 2016 also could opt to pay more into the pension fund, city officials said. In exchange, workers who make the higher pension payments could retire at 65 instead of 67. The plan would not affect people hired by the city before 2011 or laborers who have already retired.

The city would gradually increase how much it puts into the laborers' pension fund, with the aim of reaching 90 percent funding by 2057. To come up with part of the money, Emanuel would spend all of the proceeds from a $1.40-a-month tax hike on emergency services slapped onto all city phone bills in 2014. That boosted city revenue by about $40 million a year.

The administration, however, did not provide a schedule of how payments would increase the next 40 years. City Hall officials also said they don't yet have figures on how much money they expect to save under the proposal. The laborers' fund is about $1.2 billion short of what's needed to pay retiree benefits. It's at risk of going broke in about 11 years.

Joe Healy, business manager for Laborers Local 1092, said the two unions representing city laborers have agreed to the deal, figuring that the extra employee contributions represent an equal trade for retiring two years earlier. But Healy also cautioned that the Laborers' Annuity and Benefit Fund is still reviewing the numbers on the value of the trade-off.

Emanuel went back to the drawing board after the state's high court rejected his 2014 plan to restore financial health to both the laborers' fund and the Municipal Employees' Annuity and Benefit Fund. Justices ruled that reduced cost-of-living increases violated a clause in the Illinois Constitution that states retiree benefits "shall not be diminished or impaired."

But the court left unanswered the question of whether the city could require employees to pay more toward their retirement and also suggested the city could give employees the option of keeping their own plan or switching to a new one, provided they were offered something of value — "consideration" in legal contract parlance. With the mayor's new plan, the earlier retirement is the consideration, Rendina said.

Ralph Martire, the executive director of the Center for Tax and Budget Accountability who was critical of the legal soundness of the Emanuel's earlier plan, said the outline of the latest one likely would fall within the boundaries of the constitution. The city can "create any kind of new" pension plan it wants for employees yet to be hired, and it can provide options to current employees — provided one of the choices is keeping their current plan.

"I don't see how there's a constitutional complication to it," said Martire, who added one caution: If future benefits fall below those provided by Social Security — which city workers don't receive — the city could ultimately run afoul of federal law and have to pay more into the funds.

The $1.2 billion laborers' shortfall is significantly smaller than the ones faced by city pension funds for municipal workers, police officers and firefighters. The municipal workers' fund alone is nearly $10 billion short and at risk of going broke within eight years.

Still, the mayor hopes that the new laborers' bill serves as a model for talks with the municipal workers' fund, and city officials have started talking to leaders of some of the dozens of unions that represent those city employees. "If we reach agreement with them, we'll have to come up with alternate funding source for that," said Alexandra Holt, the city's budget director.

Emanuel's latest pension plan comes as he's under pressure for solutions. After the Supreme Court ruling in March, Wall Street agencies that evaluate city creditworthiness warned the city that it could further downgrade the city's already low debt ratings if it did not come up with a plan. At the time, Emanuel financial aides told the analysts that the city would come up with a plan within weeks.

Given unresolved problems with all four city pension funds, it's uncertain whether proposing a plan for the smallest of the funds will soothe the angst felt on Wall Street over the city's financial problems. Emanuel last week won City Council approval to borrow up to $600 million, and a lowered credit rating could increase interest costs.
Karen Pierog of Reuters also reports, Chicago, unions reach deal to rescue city pension fund:
Chicago would increase its annual contribution to its laborers' retirement system, as would newer workers, in order to save the fund from insolvency, under an agreement in principle announced on Monday by Mayor Rahm Emanuel and unions.

While the city hailed the deal for the smallest of its four pension systems, a solution has yet to emerge for its largest fund, covering more than 50,000 active and retired municipal workers.

The city will dedicate $40 million a year from a 2014 increase in its 911 telephone surcharge to the laborers' fund, under the agreement. Workers hired after Jan. 1, 2017, would have to contribute 11.5 percent of their salaries, while those hired after Jan. 1, 2011, would choose between contributing 11.5 percent and retiring at age 65 or contributing 8.5 percent and retiring at 67.

Chicago needs the Illinois legislature to approve later this year a five-year phase-in of the higher contributions by the city to the laborers' system to attain a 90 percent funding level by 2057. The fund, which had $1.36 billion in assets at the end of 2014, covers nearly 3,000 active workers and 2,700 retirees.

In March, the Illinois Supreme Court tossed out a 2014 state law aimed at making the laborers' fund and the municipal pension system solvent by requiring higher contributions from the city and affected workers and reducing benefits.

Emanuel has said that ruling put Chicago into a straitjacket by reaffirming iron-clad protection in the Illinois Constitution against reducing public sector worker pension benefits.

Chicago Budget Director Alex Holt said the deal for the laborers' fund does not reduce benefits but gives newer workers choices as to when they can retire.

"Choice is one of the areas that the Illinois Supreme Court indicated should pass constitutional muster," she told reporters in a conference call.

The impact of the high court's ruling, along with new accounting changes, more than doubled the unfunded liability for the municipal fund to $18.6 billion at the end of 2015 from $7.13 billion at the end of 2014, according to an actuarial report by Segal Consulting released last week. It predicted the system will run out of money within the next 10 years in the absence of increased funding.

"We feel that the solution we laid out for laborers offers a good framework for discussions with the (municipal) fund," said Chicago Chief Financial Officer Carole Brown.
Those new accounting changes really sting. Elizabeth Campbell of Bloomberg reports, Chicago’s Pension-Fund Woes Just Became $11.5 Billion Bigger:
Chicago’s pension-fund shortfall just got $11.5 billion bigger.

Thanks to the defeat of the city’s retirement-fund overhaul by the Illinois Supreme Court and new accounting rules, Chicago’s so-called net pension liability to its Municipal Employees’ Annuity and Benefit Fund soared to $18.6 billion by the end of 2015 from $7.1 billion a year earlier, according to its annual report. The fund serves some 70,000 workers and retirees.

The new figure, a result of actuaries’ revised estimates for the value in today’s dollars of benefits due as long as decades from now, doesn’t change how much Chicago needs to contribute each year to make sure the promised checks arrive. But it highlights the long-term pressure on the city from shortchanging its retirement funds year after year -- decisions that are now adding hundreds of millions of dollars to its annual bills and have left it with a lower credit rating than any big U.S. city but once-bankrupt Detroit.

“The longer they wait to get this fixed, the more expensive it’s going to get for the city’s taxpayers,” Richard Ciccarone, the Chicago-based president of Merritt Research Services LLC, which analyzes municipal finances.

The estimate presented Thursday to the board of the municipal fund, one of Chicago’s four pensions, will add to what had been an unfunded retirement liability for the city estimated at $20 billion.

A key driver was the court ruling striking down Mayor Rahm Emanuel’s plan that cut benefits and boosted city and employee contributions. Without it in place, the fund is now set to run out of money within 10 years.

That triggered another change. New accounting rules, adopted to keep governments from using overly optimistic investment-return forecasts to mask the scale of their liabilities, require them to use more modest assumptions once pension plans go broke. As a result, the reported liabilities jump.

The Chicago fund is notable because very few governments have been affected by the change, according to Ciccarone. “The investment returns are not going to fix the problems themselves,” he said.

City officials from Emanuel to Chief Financial Officer Carole Brown have said the city is working on a solution to shore up the retirement system. Chicago has already passed a record property-tax increase that will bolster the police and fire funds.

Under the traditional way of estimating the municipal fund’s obligations, which is how annual contributions are set, the shortfall rose to $9.9 billion as of Dec. 31, based on market value of its assets, according to the actuaries report. That’s up from $7.1 billion a year earlier.

The pension is only 32 percent funded -- meaning it has 32 cents for every dollar it owes -- compared to 42 percent last year, according to the actuaries. And it has to sell 12 percent to 15 percent of its assets every year to pay out benefits.

City officials are having “very good discussions” with the unions about the issue, according to Emanuel, who has made clear that he disagrees with the court’s ruling to throw out his plan.

“We’re working through the issue to get to what I call a responsible way to fund their pensions within the confines, the straitjacket that the court has determined,” Emanuel told reporters at City Hall on Wednesday.

A proposal is pending in the state legislature to bolster funding for the benefit fund. The plan would ensure it’s 90 percent funded by the end of fiscal year 2055. Jim Mohler, executive director of the fund, told board members on Thursday that it’s a “fluid situation.”
I've already covered Chicago's pension nightmare in detail. If you ever want to get a glimpse of America's future pension crisis, have a look at what's going on in Chicago because it's coming to a city near you. I guarantee you will see a series of never-ending crazy hikes in property taxes to pay for chronically underfunded public pensions.

When Greece was going through its crisis last year, my uncle from Crete would call me and blurt: "It's worse than Chicago here!" referring to the old Al Capone days when Chicago was the Wild West. Little did he know that in many ways, Chicago is much worse than Greece because Greeks had no choice but to swallow their bitter medicine (and they're still swallowing it).

In Chicago, powerful public unions are going head to head with a powerful and unpopular mayor who got rebuffed by Illinois's Supreme Court when he tried cutting pension benefits. Now, they are tinkering around the edges, increasing the contribution rate for new employees of the city's smallest pension, which is not going to make a significant impact on what is truly ailing Chicago and Illinois's public pensions.

All these measures are like putting a band-aid over a metastasized tumor. Creditors know exactly what I'm talking about which is why I'll be shocked if they ease up on the city's credit rating.

Importantly, when a public pension is 42% or 32% funded, it's effectively broke and nothing they do can fix the problem unless they increase contributions and cut benefits for everyone, top up these pensions and introduce real governance and a risk-sharing model.

When people ask me what's the number one problem with Chicago's public pensions, I tell them straight out: "Governance, Governance and Governance". This city has a long history of corrupt public union leaders and equally corrupt politicians who kept masking the pension crisis for as long as possible. And Chicago isn't alone; there are plenty of other American cities in dire straits when it comes to public finances and public pensions.

But nobody dares discuss these problems in an open and honest way. Unions point the finger at politicians and politicians point the finger at unions and US taxpayers end up footing the public pension bill.

This is why when I read stupid articles in Canadian newspapers questioning the compensation and performance at Canada's large public pensions, I ignore them because these foolish journalists haven't done their research to understand why what we have here is infinitely better than what they have in the United States and elsewhere.

Why are we paying Canadian public pension fund managers big bucks? Because we got the governance right, paying public pension managers properly to bring assets internally, diversifying across public and private assets all around the world and only paying external funds when it can't be replicated internally. This lowers the costs and improves the performance of our public pensions which is why none of Canada's Top Ten pensions are chronically underfunded (a few are even over-funded and super-funded).

What else? Canada's best public pensions -- Ontario Teachers, HOOPP and even smaller ones like CAAT and OPTrust -- have implemented a risk-sharing model that ensures pension beneficiaries and governments share the risk of the plan so as not to impose any additional tax burden on Canadian taxpayers if these plans ever become underfunded. This level of governance and risk-sharing simply doesn't exist at any US public pension which is why many of them are chronically underfunded or on the verge of becoming chronically underfunded.

Below, FBN's Jeff Flock breaks down Chicago's growing pension shortfall. Like I said, get ready for never-ending property tax hikes if you live in cities like Chicago, it's only going to get worse

Tuesday, May 24, 2016

Top Funds' Activity For Q1 2016

Svea Herbst-Bayliss and Sam Forgione of Reuters report, Top U.S. hedge funds bet on Alphabet, Netflix and retailers:
Former SAC executive Gabe Plotkin's Melvin Capital took a new position in streaming video service Netflix Inc, buying 950,000 shares and a call option for 1.45 million shares, according to regulatory filings on Monday. Melvin Capital also took a new position in Home Depot Inc, buying 475,000 shares. And Passport Capital added 3.3 million Yahoo Inc shares, upping its stake by 243 percent, filings show.

These hedge-fund SEC disclosures are backward-looking and come out 45 days after the end of each quarter. Still, the filings offer a glimpse into what hedge fund managers saw as investment opportunities.

The filings do not disclose short positions, or bets that a stock will fall. As a result, the public filings do not always present a complete picture of a management firm's stock holdings.

The following are some of the hot stocks and sectors in which hedge fund managers either took new positions or exited existing stakes in the first quarter.


Seth Klarman's Baupost Group bought into the company, putting on a new position with 1.7 million shares. Similarly, Davidson Kempner Capital Management added a new position, buying 833,099 shares while Adage Capital Partners nearly doubled its holdings by buying 547,759 shares to own 1.2 million.

But Senator Investment Group cut its position by more than half when it sold 875,000 shares and Third Point trimmed its holding by selling 400,000 shares to own 5 million. Also, Jana Partners cut its stake by 718,000 shares to 447,000 shares, while Omega Advisors cut its stake by about 221,000 shares to 561,000 shares.


Jana Partners sold its entire stake of 4.3 mln shares. Omega Advisors trimmed its stake by 583,000 shares to 3.5 million shares.


Jana Partners took a new stake of 634,000 Class C shares. Third Point took a new stake of 700,000 Class A Alphabet shares, while Omega Advisors trimmed its stake by 151,000 Class A shares to about 277,000 Class A shares.


John Burbank's Passport Capital sold 36,577 shares, reducing the firm’s holding by 35 percent. Suvretta Capital took a new position, buying 248,311 shares. Omega Advisors sold its entire stake of about 36,000 shares.


Jana Partners took a new stake of 750,000 shares.


Jana Partners sold entire stake of 5.7 million shares.


Sachem Head added a new position, buying 2.46 million shares.


Passport Capital sold 325,434 shares of the social media company, cutting its stake by more than one quarter. Omega Advisors trimmed its stake by 526,000 Class A shares to 459,000 Class A shares.


The retailer saw its stock price surge 66 percent during the first quarter. Davidson Kempner sold its holding of 1 million shares.


Omega Advisors sold its entire stake of 1.1 million shares.


Melvin Capital put on a new position, buying 1.35 million shares in the retailer, which gained 43 percent in the first quarter. Davidson Kempner took a new position, adding 200,000 shares.


Jana Partners sold its entire stake of 5.9 million Class C shares.


Suvretta Capital exited its position, selling 825,900 shares.


Passport Capital sold 1.2 million shares, cutting the firm’s stake by 27 percent. Omega Advisors increased its stake by 947,000 shares to 1.8 million shares.


Sachem Head liquidated its entire position, selling 3.35 million shares.


Senator Investment Group raised its holding by 130 percent when it added 8.5 million shares in the drug maker. Jana Partners increased its stake by 4.3 million shares to 13.5 million shares. Omega Advisors sold its entire stake of 1.3 million shares.


Jana Partners sold its entire stake of 9.2 million shares.


Blue Mountain Capital added 106,011 shares.


Jana Partners sold its entire stake of 1.6 million shares.


Davidson Kempner liquidated its position, selling 1.97 million shares.


A number of hedge funds liquidated their positions. Sachem Head sold 4.2 million shares, exiting the position it took in 2014. Hitchwood Capital sold its entire position, liquidating 2.5 million shares. Twin Capital sold its entire stake of 33,180 shares.
It's that time of the year again when we get to peek into the activity of top hedge funds, with a 45-day lag. Q1 was a very volatile quarter which started off terribly before markets recovered so it's interesting to look at top funds' activity during this quarter.

You can read many articles on 13F filings on Barron's, Reuters, Bloomberg, CNBC, Forbes and other sites like Insider Monkey, Holdings Channel, and whale wisdom. My favorite service for tracking top funds is Symmetric run by Sam Abbas and David Moon but there are other services offered by market folly and you can track tweets from Hedgemind and subscribe to their services too.

Before I delve into Q1 activity, let's go over a few more articles. Devika Krishna Kumar of Reuters reports, Paulson cut gold bets again as Soros, others rushed back:
Gold bull John Paulson slashed his bets on bullion while billionaire investor George Soros and other big funds returned to the metal for the first time in years, filings showed on Monday, as prices staged their biggest rally in nearly 30 years.

New York-based hedge fund Paulson & Co, led by John Paulson, one of the world's most influential gold investors, slashed its investment in SPDR Gold Trust, the world's biggest gold exchanged-traded fund (ETF), by 17 percent to 4.8 million shares, U.S. Securities and Exchange Commission filings showed on Monday.

It was Paulson's third cut to his SPDR stake in a year and saw him drop to the third largest investor in the fund from second, behind BlackRock and First Eagle Investment Management.

"If you were already long, which clearly Paulson was, maybe he's just taking some profits off the table," Mike Dragosits, senior commodities strategist at TD Securities said.

In an interview with Reuters last July, Paulson described prices, which were languishing at five-year lows around $1,100 per ounce at the time, as "fairly valued".

His outlook suggested he believed prices had little room to recover significantly as the Federal Reserve prepared to hike rates, ending an era of low rates and taking the sheen off bullion.

Since the end of the first quarter, prices have extended their rally, hitting fresh one-year highs above $1,300 earlier this month as investors have bet that the pace of interest rate increases may be slower than previously expected amid global economic turmoil.

Volatile equity markets and negative rates in some countries have also boosted demand for a store of wealth.

Paulson's view on gold has been closely followed since he earned roughly $5 billion on a bet on the metal in 2010, following a similarly successful $4 billion payday on his bet against the overheated housing market in 2007.

In stark contrast, Soros, who once called gold "the ultimate bubble," returned to gold for the first time in three years in the quarter buying 1.05 million shares in the gold ETF, valued at about $123.5 million.

Soros Fund Management LLC had sold its stake of almost 531,000 shares worth $82 million in the fund in the first quarter of 2013.

Others have followed Soros back into gold, although on a smaller scale, including Jana Partners, led by activist investor Barry Rosenstein, which bought 50,000 shares, worth about $5.9 million.

Monday's 13F filings come after CI Investments Inc [CIXCI.UL], an investment manager of Toronto-based CI Financial Corp, almost quadrupled its stake in the ETF, becoming the sixth-largest shareholder, a May 6 filing showed.


The buying by Soros and other big investors highlights how many funds piled back into bullion ETFs, which are backed by physical gold, as expectations of further U.S. rate increases faded.

In the first quarter this year, spot gold prices rallied 16 percent for their best quarterly performance in nearly three decades and hit their highest level in a year.

Funds have also increased exposure to gold company stocks. The Soros fund returned to invest in Barrick Gold Corp after unwinding its stake in the company in the third quarter of last year.

It bought nearly 19.4 million shares in Barrick Gold at a value of $263.7 million, the filing showed. CI Investments bought 1.5 million shares in Barrick Gold and 2.9 million shares in GoldCorp Inc.
Soros has warned that China is on the wrong path and we might experience another great crash. It seems that he's following his former protege Stan Druckemiller who is bearish and has almost a fifth of his portfolio in call options on the SPDR Gold Trust (GLD).

But Druckenmiller is hedging his bearish bets, moving considerable assets into emerging markets:
In the first quarter, he bought 2,971,000 shares of the iShares MSCI Emerging Markets ETF (EEM) at a cost of around $101.8 million. The holding, which made up 7.6% of his portfolio at the end of the quarter, became his third largest, behind gold and Facebook (FB).

The position has seen little payoff as of Thursday afternoon, with the ETF’s price up 3% from the first-quarter average of $31 per share. Over the past five years, it has slumped 32%.

Investors tracked by GuruFocus seemed split on the investment in the first quarter, with four, including Druckenmiller, starting a new position in the ETF and four, including Leon Cooperman and John Burbank, selling theirs, though Burbank maintains call options. Ray Dalio, head of Bridgewater Associates, has the biggest emerging markets position, with almost 43 million shares worth almost 19% of his long portfolio.
If you believe in the global recovery story, you too should be buying Emerging Markets (EEM), Metals & Mining (XME), Energy (XLE), Oil Services (OIH) and Oil Exploration (XOP) stocks to benefit from this recovery. I remain highly skeptical and think these markets feel more like 1997 than 2007.

Importantly, as the US dollar reverses course in the second half of the year and starts rising again relative to other currencies, you're going to see all these sectors get hit again. 

The rising USD should provide relief in terms of deflationary pressures in Asia and Europe but it also means lower commodity and gold prices. It also means lower import prices for the US which will lower inflation expectations there, effectively importing deflation into that country.

My best advice remains to focus on the big picture which is DEFLATION. This is why I remain bullish bonds (TLT) and to a lesser extent high dividend sectors. The problem with the latter which are made up of utilities, REITS, telecoms and staples is that they ran up too much and have become very crowded. Also, any potential rise in rates will hurt these sectors as they are very interest rate sensitive.

In terms of risk trades, I still trade biotech shares (IBB and XBI) which got slaughtered this year and are coming back strong even if concerns over Valeant (VRX) continue to weigh on the sector.

So, when people ask me my Long/ Short macro trade for the second half of the year it's to go long biotechs (IBB and XBI) and short Metals & Mining (XME), Energy (XLE), and Emerging Markets (EEM).

Of course, if things get really bad, all sectors are going to get slammed hard, especially high beta biotechs, and the only thing that will save your portfolio are good old government bonds.

Bearing this in mind, have fun peering into the portfolios of top funds below but be warned, in these markets, things move so fast that a lot of this information is useless or worse, deadly in the hands of amateurs.

In the hands of experts, however, this information is gold, and there are plenty of ways to make money. As an example, the recent buyouts of Anacor Pharmaceuticals (ANAC) and Xenoport (XNPT) couldn't have been predicted but you had expert funds that bought their dips heavily and made nice profits in the process.

The top fund managers don't look at the crowd, they focus on finding gems in this market and they are great stock pickers. It doesn't mean they're always right or that their timing is right but they have conviction and that's something I like in these markets.

For example, look at Keryx Biopharmaceuticals (KERX). Among its top holders you will see Seth Klarman's Baupost Group and his former protege David Abrams of Abrams Capital (the one-man wealth machine).

Shares of Keryx jumped 18% in April as revenues came in at $6.8 million, driven primarily by a big jump in US sales of Auryxia, a drug to treat renal disease. The chart of Keryx shares is the type of chart I like as you had a big dip and long period of consolidation and now shares are on the verge of breaking out above $6 a share which is very bullish (click on image):

Now, don't go throwing all your money into this or any other small biotech but when you have two of best value investors in the world long the same company, it's because they see things most don't and maybe they're on to a huge multi-bagger here which will eventually be bought out (it won't be the first time Seth Klarman scores big on a small biotech company but it doesn't mean he is always right as his fund has also struggled lately).

I'm just giving you one of many interesting ideas I like but it takes time and it's tedious going through all the holdings of these top funds to find hidden gems. Elite hedge funds have an army of quants dissecting these holdings to see where the best opportunities lie ahead but most people and most funds simply can't be bothered. 

Still, look at the top holdings, look at funds which take concentrated bets, look at the charts and analyze the companies and you'll get plenty of ideas of where to invest in. 

I always start with my macro outlook and then work down to look at themes and companies to invest and trade. It's a tough game which is why a lot of hedge funds and active managers are under-performing this year but if you want company specific ideas, you can learn a lot by track where top funds invest every quarter and more importantly, think as to why they invested there at that time.

Here are the links to top funds' activity. Enjoy but don't take this stuff too seriously, it's a dynamic market where things constantly change and even the best of the best find it tough to make money. 

Top multi-strategy and event driven hedge funds

As the name implies, these hedge funds invest across a wide variety of hedge fund strategies like L/S Equity, L/S credit, global macro, convertible arbitrage, risk arbitrage, volatility arbitrage, merger arbitrage, distressed debt and statistical pair trading.

Unlike fund of hedge funds, the fees are lower because there is a single manager managing the portfolio, allocating across various alpha strategies as opportunities arise. Below are links to the holdings of some top multi-strategy hedge funds I track closely:

1) Citadel Advisors

2) Balyasny Asset Management

3) Farallon Capital Management

4) Peak6 Investments

5) Kingdon Capital Management

6) Millennium Management

7) Eton Park Capital Management

8) HBK Investments

9) Highbridge Capital Management

10) Highland Capital Management

11) Pentwater Capital Management

12) Och-Ziff Capital Management

13) Pine River Capital Capital Management

14) Carlson Capital Management

15) Magnetar Capital

16) Mount Kellett Capital Management 

17) Whitebox Advisors

18) QVT Financial 

19) Perry Capital

20) Visium Asset Management

21) Weiss Multi-Strategy Advisors

22) York Capital Management

Top Global Macro Hedge Funds and Family Offices

These hedge funds gained notoriety because of George Soros, arguably the best and most famous hedge fund manager. Global macros typically invest in bond and currency markets but the top macro funds are able to invest across all asset classes, including equities.

George Soros, Carl Icahn, Stanley Druckenmiller, Julian Robertson and now Steve Cohen have converted their hedge funds into family offices to manage their own money and basically only answer to themselves (that is my definition of true investment success).

1) Soros Fund Management

2) Icahn Associates

3) Duquesne Family Office (Stanley Druckenmiller)

4) Bridgewater Associates

5) Caxton Associates (Bruce Covner)

6) Tudor Investment Corporation

7) Tiger Management (Julian Robertson)

8) Moore Capital Management

9) Point72 Asset Management (Steve Cohen)

10) Bill and Melinda Gates Foundation Trust (Michael Larson, the man behind Gates)

Top Market Neutral, Quant and CTA Hedge Funds

These funds use sophisticated mathematical algorithms to initiate their positions. They typically only hire PhDs in mathematics, physics and computer science to develop their algorithms. Market neutral funds will engage in pair trading to remove market beta.

1) Alyeska Investment Group

2) Renaissance Technologies

3) DE Shaw & Co.

4) Two Sigma Investments

5) Numeric Investors

6) Analytic Investors

7) Winton Capital Management

8) Graham Capital Management

9) SABA Capital Management

10) Quantitative Investment Management

11) Oxford Asset Management

Top Deep Value,
Activist, Event Driven and Distressed Debt Funds

These are among the top long-only funds that everyone tracks. They include funds run by legendary investors like Warren Buffet, Seth Klarman, Ron Baron and Ken Fisher. Activist investors like to make investments in companies where management lacks the proper incentives to maximize shareholder value. They differ from traditional L/S hedge funds by having a more concentrated portfolio. Distressed debt funds typically invest in debt of a company but sometimes take equity positions.

1) Abrams Capital Management

2) Berkshire Hathaway

3) Baron Partners Fund (click here to view other Baron funds)

4) BHR Capital

5) Fisher Asset Management

6) Baupost Group

7) Fairfax Financial Holdings

8) Fairholme Capital

9) Trian Fund Management

10) Gotham Asset Management

11) Fir Tree Partners

12) Elliott Associates

13) Jana Partners

14) Schneider Capital Management

15) Highfields Capital Management 

16) Eminence Capital

17) Pershing Square Capital Management

18) New Mountain Vantage  Advisers

19) Atlantic Investment Management

20) Scout Capital Management

21) Third Point

22) Marcato Capital Management

23) Glenview Capital Management

24) Apollo Management

25) Avenue Capital

26) Armistice Capital

27) Blue Harbor Group

28) Brigade Capital Management

29) Caspian Capital

30) Kerrisdale Advisers

31) Knighthead Capital Management

32) Relational Investors

33) Roystone Capital Management

34) Scopia Capital Management

35) ValueAct Capital

36) Vulcan Value Partners

37) Okumus Fund Management

38) Eagle Capital Management

39) Sasco Capital

40) Lyrical Asset Management

41) Gabelli Funds

42) Brave Warrior Advisors

43) Matrix Asset Advisors

44) Jet Capital

45) Starboard Value

Top Long/Short Hedge Funds

These hedge funds go long shares they think will rise in value and short those they think will fall. Along with global macro funds, they command the bulk of hedge fund assets. There are many L/S funds but here is a small sample of some well known funds.

1) Adage Capital Management

2) Appaloosa Capital Management

3) Greenlight Capital

4) Maverick Capital

5) Pointstate Capital Partners 

6) Marathon Asset Management

7) JAT Capital Management

8) Coatue Management

9) Omega Advisors (Leon Cooperman)

10) Artis Capital Management

11) Fox Point Capital Management

12) Jabre Capital Partners

13) Lone Pine Capital

14) Paulson & Co.

15) Bronson Point Management

16) Hoplite Capital Management

17) LSV Asset Management

18) Hussman Strategic Advisors

19) Cantillon Capital Management

20) Brookside Capital Management

21) Blue Ridge Capital

22) Iridian Asset Management

23) Clough Capital Partners

24) GLG Partners LP

25) Cadence Capital Management

26) Karsh Capital Management

27) New Mountain Vantage

28) Andor Capital Management

29) Silver Point Capital

30) Steadfast Capital Management

31) Brookside Capital Management

32) PAR Capital Capital Management

33) Gilder, Gagnon, Howe & Co

34) Brahman Capital

35) Bridger Management 

36) Kensico Capital Management

37) Kynikos Associates

38) Soroban Capital Partners

39) Passport Capital

40) Pennant Capital Management

41) Mason Capital Management

42) SAB Capital Management

43) Sirios Capital Management 

44) Hayman Capital Management

45) Highside Capital Management

46) Tremblant Capital Group

47) Decade Capital Management

48) T. Boone Pickens BP Capital 

49) Bloom Tree Partners

50) Cadian Capital Management

51) Matrix Capital Management

52) Senvest Partners

53) Falcon Edge Capital Management

54) Melvin Capital Partners

55) Owl Creek Asset Management

56) Portolan Capital Management

57) Proxima Capital Management

58) Tiger Global Management

59) Tourbillon Capital Partners

60) Impala Asset Management

61) Valinor Management

62) Viking Global Investors

63) Marshall Wace

64) York Capital Management

65) Zweig-Dimenna Associates

Top Sector and Specialized Funds

I like tracking activity funds that specialize in real estate, biotech, healthcare, retail and other sectors like mid, small and micro caps. Here are some funds worth tracking closely.

1) Armistice Capital

2) Baker Brothers Advisors

3) Palo Alto Investors

4) Broadfin Capital

5) Healthcor Management

6) Orbimed Advisors

7) Deerfield Management

8) BB Biotech AG

9) Ghost Tree Capital

10) Sectoral Asset Management

11) Oracle Investment Management

12) Perceptive Advisors

13) Consonance Capital Management

14) Camber Capital Management

15) Redmile Group

16) RTW Investments

17) Bridger Capital Management

18) Southeastern Asset Management

19) Bridgeway Capital Management

20) Cohen & Steers

21) Cardinal Capital Management

22) Munder Capital Management

23) Diamondhill Capital Management 

24) Cortina Asset Management

25) Geneva Capital Management

26) Criterion Capital Management

27) Daruma Capital Management

28) 12 West Capital Management

29) RA Capital Management

30) Sarissa Capital Management

31) SIO Capital Management

32) Senzar Asset Management

33) Sphera Funds

34) Tang Capital Management

35) Thomson Horstmann & Bryant

36) Venbio Select Advisors

Mutual Funds and Asset Managers

Mutual funds and large asset managers are not hedge funds but their sheer size makes them important players. Some asset managers have excellent track records. Below, are a few funds investors track closely.

1) Fidelity

2) Blackrock Fund Advisors

3) Wellington Management

4) AQR Capital Management

5) Sands Capital Management

6) Brookfield Asset Management

7) Dodge & Cox

8) Eaton Vance Management

9) Grantham, Mayo, Van Otterloo & Co.

10) Geode Capital Management

11) Goldman Sachs Group

12) JP Morgan Chase & Co.

13) Morgan Stanley

14) Manulife Asset Management

15) RCM Capital Management

16) UBS Asset Management

17) Barclays Global Investor

18) Epoch Investment Partners

19) Thornburg Investment Management

20) Legg Mason Capital Management

21) Kornitzer Capital Management

22) Batterymarch Financial Management

23) Tocqueville Asset Management

24) Neuberger Berman

25) Winslow Capital Management

26) Herndon Capital Management

27) Artisan Partners

28) Great West Life Insurance Management

29) Lazard Asset Management 

30) Janus Capital Management

31) Franklin Resources

32) Capital Research Global Investors

33) T. Rowe Price

34) First Eagle Investment Management

35) Frontier Capital Management

36) Akre Capital Management

Canadian Asset Managers

Here are a few Canadian funds I track closely:

1) Letko, Brosseau and Associates

2) Fiera Capital Corporation

3) West Face Capital

4) Hexavest

5) 1832 Asset Management

6) Jarislowsky, Fraser

7) Connor, Clark & Lunn Investment Management

8) TD Asset Management

9) CIBC Asset Management

10) Beutel, Goodman & Co

11) Greystone Managed Investments

12) Mackenzie Financial Corporation

13) Great West Life Assurance Co

14) Guardian Capital

15) Scotia Capital

16) AGF Investments

17) Montrusco Bolton

18) Venator Capital Management

Pension Funds, Endowment Funds, and Sovereign Wealth Funds

Last but not least, I track activity of some pension funds, endowment funds and sovereign wealth funds. I like to focus on funds that invest in top hedge funds and have internal alpha managers. Below, a sample of pension and endowment funds I track closely:

1) Alberta Investment Management Corporation (AIMco)

2) Ontario Teachers' Pension Plan

3) Canada Pension Plan Investment Board

4) Caisse de dépôt et placement du Québec

5) OMERS Administration Corp.

6) British Columbia Investment Management Corporation (bcIMC)

7) Public Sector Pension Investment Board (PSP Investments)

8) PGGM Investments

9) APG All Pensions Group

10) California Public Employees Retirement System (CalPERS)

11) California State Teachers Retirement System (CalSTRS)

12) New York State Common Fund

13) New York State Teachers Retirement System

14) State Board of Administration of Florida Retirement System

15) State of Wisconsin Investment Board

16) State of New Jersey Common Pension Fund

17) Public Employees Retirement System of Ohio

18) STRS Ohio

19) Teacher Retirement System of Texas

20) Virginia Retirement Systems

21) TIAA CREF investment Management

22) Harvard Management Co.

23) Norges Bank

24) Nordea Investment Management

25) Korea Investment Corp.

26) Singapore Temasek Holdings 

27) Yale Endowment Fund

Below, CNBC's Landon Dowdy takes a look at how some of the Street's biggest money managers are investing their funds.

Also, David Einhorn and Warren Buffett agree that Apple is a buy. I don't think you need to be Warren Buffett to figure that out but it's worth bearing in mind that Apple faces huge challenges ahead as iPhone sales dwindle (they better come out with something great for iPhone 7 this fall).

Interestingly, the Tiger Fund's Julian Robertson dissolved the hedge fund's stake in Apple; and Farallon Capital Management turned bearish on U.S. stocks, reports CNBC's Kate Kelly.

And according to the firm's 13F filing, hedge fund billionaire David Tepper is out of Apple and taken new positions in Facebook and Bank of America.

If you listen to CNBC, you'd think that Apple, Facebook and Alphabet (Google) are the only companies in the world! The coverage of 13F filings is just horrible.