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Cypen & Cypen
FEBRUARY 8, 2007

Stephen H. Cypen, Esq., Editor

Never Forget - September 11, 2001


A sitting City Commissioner asked the Florida Attorney General for an opinion concerning Article II, Section 5(a) of the Florida Constitution, which generally prohibits dual office holding. The City Commissioner stated that a Broward County Commissioner wished to appoint her to the Broward County Planning Council. Understandably, she was concerned about the Constitutional dual office-holding prohibition. The Attorney General found that the governing body of each unit clearly is an “office.” However, it has long been a settled rule in Florida that, assuming a particular officeholder is subject to the Constitutional dual office-holding prohibition, the legislative designation of that officer to perform ex officio the function of another or additional office is not a holding of two offices at the same time in violation of the Constitution, provided the duties imposed are consistent with those being exercised. Here, the Broward County Charter clearly provided that each County Commissioner shall nominate two individuals to serve on the Planning Council, one of whom shall be an elected municipal official of a municipality within the Commissioner’s district. In fact, the County Charter provides that if a member of the Planning Council is an elected municipal official and ceases to be an elected municipal official, that individual’s membership on the Council terminates and the position is deemed vacant. Thus, the Attorney General opined that an appointment to the Broward County Planning Council of an elected municipal official of a municipality within the Commissioner’s district does not violate the Constitutional prohibition against dual office-holding contained in Article II, Section 5(a), Florida Constitution. (AGO 2007-06, January 26, 2007).


It’s the same old story: this year’s losers are likely to be next year’s winners. An S&P study reported in concluded that very few funds manage consistently to repeat top-half or top-quartile performance in 2006. Over five years ended December 31, 2006, only 71 (13.2%) large-cap, 16 (9.9%) mid-cap and 24 (10%) small-cap funds hung on to their top-half ranking over five consecutive 12-month periods. A total of eight (3%) large-cap, two (2.5%) mid-cap and zero small-cap funds maintained a top-quartile ranking over the same period. Screening for top-quartile funds, as the sole basis for an investment decision, is inappropriate. Very few funds repeat a top-quartile performance. A healthy percentage, and in most cases a majority, of top-quartile funds in the future will most likely come from the ranks of prior period second and third quartiles. The characteristics of top performing funds are similar. On average, top funds tend to have more experienced management and lower expenses relative to their peers. They also focus on minimizing losses during down markets. (Remember, if your fund declines 50%, it takes a 100% return to get even.)


According to the “Super Bowl Theory,” a win by a team from the old National Football League means a rising S&P 500 for the next year. A win from the old American Football League means stocks will fall. Inasmuch as the Indianapolis Colts and the Chicago Bears both belong to the old NFL, there can be no clear cut significance to the Colts’ 29-17 win last Sunday. Incredibly, since the first Super Bowl was played 41 years ago, the Super Bowl indicator has correctly forecast direction of the S&P 500 three out of four times. However, the trend is not particularly good: the Super Bowl indicator boasts only one “clean” win in the past nine years.

As expected (see C&C Newsletter for January 11, 2007, Item 1; C&C Newsletter for December 21, 2006, Item 1; C&C Newsletter for December 7, 2006, Item 2 and C&C Newsletter for October 19, 2006, Item 2), reports that the Federal Aviation Administration has proposed to let older pilots keep flying until they are 65, reversing long-standing support for mandatory retirement at age 60. The agency will go through a detailed rule making process, but it is unclear as to how long it might take to implement the change. Hotly-contested rule making procedures could last 18 months or more. Regulators’ change of direction signals that the airline industry anticipates a tight pilots’ labor market, as well as erosion of existing pilot pensions that are prompting more veterans to seek extended careers.


Strong equity markets in 2006 proved to be a boon for institutional investors, as those with value-heavy strategy brought in top returns. Corporate and public pension funds, as well as foundations and endowments, all reaped double-digit returns last year. Corporate and public funds posted median returns of 13.7% and 13.5%, respectively, while foundations and endowments returned 14.3%. These returns represent a sharp increase from returns of 2005, when corporate and public funds returned 7.8% and foundations returned 8.2%. In general, all plans benefitted from robust equity markets. Indeed, the S&P 500 Index returned 15.7% in 2006 and the MSCI World Index, excluding U.S. stocks, returned nearly 23%. Interest rates were a big concern for plans in 2006, as investors questioned whether a string of rate hikes would continue. Plans generally brought in strong returns in the first quarter, between 4% and 5%, as markets were driven partly by a belief that the Federal Reserve was finished raising interest rates. But investors experienced a slow down in the second and third quarters as increases continued. Returns were on the upswing again in the fourth quarter as the Fed halted increases and equities began to take off. Strong corporate profits also contributed to the market rally. In the fourth quarter alone, plans posted median returns of 5.7%; the best performing plan returned 9%, while the worst returned 2.1%. This report is from, which compiled data from Northern Trust.


Joined by four colleagues, U.S. Senator Frank Lautenberg (D-New Jersey), has asked the Pension Benefit Guaranty Corporation to keep U.S. Airways on the hook for some of the shortfall existing when the carrier handed the pension plans to PBGC in 2005. In a letter, reported by, the Senators recount that PBGC agreed to cover liabilities of three U.S. Airways’ pension plans, which were 40% funded, at a cost in excess of $2 Billion. Liabilities included the pilots’ plan taken on in 2003. U.S. Airways has recently reported profits of almost $300 Million over the first three quarters of 2006, as well as cash and investments totaling $3 Billion at the end of the third quarter. The Senators say U.S. Airways is in a position to help fund its own liabilities. Understandably, the Senators also disapprove of U.S. Airways’ $10.2 Billion offer to buy larger Delta Airlines, saying that the government should not allow a company that dumped its pension responsibilities to buy another before taking care of its own employees.


Data from Bureau of Labor Statistics, U.S. Department of Labor, indicate that compensation costs for state and local government workers increased 1.0% from September 2006 to December 2006, after increasing 1.4% for the quarter ended in September. Wages and salaries in state and local government advanced 0.8% during the September to December period, slowing from the 1.4% gain in the prior quarter. Benefit costs for state and local government workers increased 1.4% in the December quarter, compared with the 1.5% gain in September. BLS News Release 07-0158 (February 2, 2007).


“Instead of loving your enemies, treat your friends a little better.” Ed Howe

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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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