Cypen & Cypen   Miami
Home Attorney Profiles Clients Resource Links Newsletters navigation
825 Arthur Godfrey Road
Miami Beach, Florida 33140

Telephone 305.532.3200
Telecopier 305.535.0050

Click here for a
free subscription
to our newsletter

Cypen building

March, 2001

Stephen H. Cypen, Esq., Editor

1. GROWTH OR VALUE -- DOES IT REALLY MATTER (UPDATE)?: Last time we reported on this burning issue, using BARRA Value and Growth Indices, we said that for the ten year period ending December 1996, Value style investing slightly outperformed Growth, 14.71% annually vs. 14.67% (see C&C Newsletter for December, 1996, Page 1). Using Russell 1000 numbers -- which should not make a big difference -- Growth outperformed Value for the eight years ended December 31, 2000, 18.2% to 17.7%. Value outperformed in 1993, 1995, 1997 and 2000; Growth outperformed in 1994, 1996, 1998 and 1999. Incidentally, for the same eight year period, the S&P 500 Index averaged 18.3%, while the EAFE International Index averaged 11.8% per year.

"Ambivalent? Well, yes and no."

2. YOU, TOO, CAN HAVE A SWISS ACCOUNT: A short piece in Fortune indicates that Swiss bank accounts, formerly reserved for the privileged, are now as attainable as Ricola lozenges and Swatch watches. has introduced an account that can be opened with a small balance and without a trip to Switzerland. For a minimum deposit of just $200.00, an Emoney Account can be opened over the internet. The accounts are real, meaning banks must abide by famously-strict Swiss banking regulations. Customers may request an anonymous "numbered account," and if a bank reveals personal or financial information it is subject to criminal charges.

3. WHAT IS A "SOFT LANDING?": The term "soft landing," Fortune reveals, was first used in astronautics journals of the late 1950’s to describe a safe moon landing. In 1973, Newsweek first used "soft landing" as an economics term. Because raging Gross Domestic Product growth usually leads to inflation, the Federal Reserve Board adjusts interest rates to encourage a "soft landing," meaning a slowing economy in which annual GDP growth stays above 2% or so.

4. CHICAGO BOARD STRIPS EX-ALDERMAN OF PENSION: The Municipal Employees Officers and Officials Annuity and Benefit Fund of Chicago has unanimously voted to forfeit the pension of former Alderman Lawrence Bloom. Bloom was released from federal prison after serving a six-month sentence for admittedly filing a false tax return in 1995. However, although he did not plead guilty to bribery, a stipulation attached to his plea admitted to several acts of wrongdoing in exchange for money. Apparently, Illinois (like Florida) calls for forfeiture of pensions upon conviction of certain offenses involving public office. Bloom contends that the attachment to his plea agreement does not constitute a conviction, and intends to seek court reversal of the board’s decision. Note that in Florida forfeiture would be clear inasmuch as Section 112.3173, Florida Statutes, defines "conviction" to include a plea of guilty or of nolo contendere. By the way, Bloom, 57, the City Council’s self-proclaimed "Mr. Clean," accepted $14,000.00 and stands to lose an annual pension of $33,000.00 at age sixty.

5. MOSERS PRODUCES NEWSLETTER: The Missouri State Employees’ Retirement System produces and distributes in advance of each scheduled MOSERS’ board meeting a "Value Added Newsletter." Its objective is to educate the trustees regarding investment issues facing them. The last four issues deal with Master Custody, Asset Allocation, Enhanced Indexing and Securities Lending. We thank Gary Findlay, Executive Director of MOSERS, for turning us on to this interesting source, which can be found at

6. WHAT WE SAID LAST MARCH: The following is a summary of what we said one year ago (see C&C Newsletter for March, 2000, Item 32). The nation is celebrating its longest economic expansion ever. The government is running a record budget surplus. Inflation might be quelled. And the Nasdaq Stock Exchange, home of technology stocks, is trading at stratospheric levels. So what’s the problem? Pensions & Investments reports that some pension consultants, investment advisers and economists are recommending that pension funds walk away from the table with their earnings by loading up on long-term, long-duration bonds such as the 30-year Treasury zero-coupon bonds and the benchmark 30-year Treasury bonds. These experts suggest that changes in the economic environment warrant pension plans’ re-examining their long-term asset allocations. We ran several other pieces in the same vein at the time, but the foregoing says (or said) it all.

"Always try to be modest and be proud of it!"

7. RESULTS OF PLAN SPONSOR’S 2000 DEFINED BENEFIT SURVEY ARE IN: Plan Sponsor’s 2000 Defined Benefit Survey of more than 400 pension funds shows overall portfolio return averaged just 4.1% in 2000 versus an average long-term actuarial target of 8.5%. Although portfolio return targets are similar across all size plans, large defined benefit plans (more than $1 Billion in assets) had the lowest portfolio return at 2.4%. By contrast, defined benefit plans with less than $200 Million in assets posted returns nearly twice as high, at 4.6%. The average respondent held $125 Million in assets. Some other interesting tidbits: nearly a quarter of all sponsors did not know whether their managers were engaging in soft-dollar arrangements, whereby a portion of the commission paid by an investment manager for brokerage is earmarked to pay for research services provided by a third party. (Follow-up interviews showed that most plan sponsors have no soft-dollar policy, a few did not know what soft-dollars were and even among larger plans few had commission recapture programs.) Similarly, more than a third of the sponsors were not sure whether their managers were required to be AIMR-compliant in their performance reporting (see C&C Newsletter for January, 1998, Page 3). And nearly two-thirds had no independent risk management or control function.

8. NASDAQ MOVES AHEAD ON DECIMALIZATION : On March 26, 2001, like the NYSE (see C&C Newsletter for February, 2001, Item 8), the Nasdaq implemented the second phase of its decimalization pilot, adding another 177 companies and 199 associated securities to the 15 that began trading in decimals on March 12, 2001. The Nasdaq plans to be converted fully by the April 9, 2001 SEC deadline.

9. DC ASSETS DIP: After surging for more than a decade, defined contribution plan assets fell for the first time last year, according to a Pensions & Investments report. The Federal Reserve Board estimates that defined contribution plan assets dropped from $2.53 Trillion to $2.52 Trillion, a .4% dip. Other fed data show that total pension fund assets, including DC plans, reached $9.84 Trillion at the end of 2000, up slightly from the $9.74 Trillion the year before. A large part of growth in total pension fund assets is attributable to state and local funds, which grew at a healthy clip to $3.12 Trillion, up 5.4% from $2.96 Trillion in 1999. For the same period, total private pension assets dropped nearly 2%, to $4.64 Trillion.

10. THE EFFECT OF PUBLIC PENSIONS ON SOCIAL SECURITY BENEFITS: The lead article in the April, 2001 Employee Benefits Digest presents an overview of the impact of public pensions on Social Security benefits. Benefits for workers who have primary careers outside Social Security coverage are affected under two provisions: (1) the government pension offset (GPO), which affects benefits that retirees might receive from their spouse’s earnings record and (2) the formula for work not covered by Social Security (Special Formula), which affects benefits that retirees receive from their own Social Security earnings if they have earnings from a primary career outside of the Social Security System. First, the GPO, with which our readers should be well acquainted (see C&C Newsletter for May, 1999, Item 13 and C&C Newsletter for August, 2000, Item 12), applies if the spouse with lower Social Security-covered earnings receives a public pension. If so, the amount received by that spouse will be offset by 66¢ for every $1.00 of government pension received. Thus, the author’s simple rule #1: a career public employee will generally not receive a Social Security benefit from his spouse’s earnings record other than Medicare. Second, except in special circumstances that would result in an undeserved negative impact on a public employee’s benefits, there is a Special Formula for retirement benefits if the Social Security recipient has a pension from work that was not covered by Social Security, leading to the author’s simple rule #2: if retiring today, most public employees would receive a Social Security benefit from their work record that is $280.00 less than the benefit calculated using the formula for other workers.

"Why should I waste my time reliving the past
when I can spend it worrying about the future?"


Municipal bond. A bond issued by a local government or one of its agencies to supplement tax revenues for use in operating or capital expenditures. This debt instrument comes in one of two forms: general obligation and revenue. Typically, this bond is exempt from federal taxes; sometimes this bond is also exempt from state and local taxes.

Mutual fund. An investment fund in which the investment company raises money from shareholders and invests in stocks, bonds, options, futures, currencies or money market securities. This fund offers investors the advantages of diversification and professional management.

Non-U.S. Dollar bond. A bond issued by a foreign government, corporation or other entity, the value of which is denominated in a currency other than the U.S. Dollar. This instrument poses currency risk to a U.S.-based investor.

"It’s frustrating when you know all the answers,
but nobody bothers to ask you the questions."

Copyright, 1996-2004, all rights reserved.

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.

Site Directory:
Home // Attorney Profiles // Clients // Resource Links // Newsletters