Posted on 06/20/2008 5:40:44 PM PDT by bugseye
Story appeared in MAIN NEWS section, Page A1
Runaway oil and food prices are angering consumers but yielding sweet profits for investors such as the California Public Employees' Retirement System.
CalPERS has racked up a 68 percent return playing the commodities market in the past 12 months. The California fund and other pension systems have done so well, in fact, that some in Congress want to ban them from the commodities markets or at least curtail their investments. The elected officials say the pension funds are playing a significant role in driving prices up simply by pouring billions of dollars into the markets
(Excerpt) Read more at sacbee.com ...
Calpers should think about cashing out while they are ahead. They have a bad record overall.
I’d be willing to keep paying $4 plus per gallon, if the barrel price would go back to $50 just so I could watch CalPers loose every investment dollar they have.
Are these the SPECULATORS! that the media and Congress keep screaming about? When will they be executed?
Not surprising Congress wants to pull the plug on this.
Sound pension systems make it harder for them to take over everyone’s retirement.
Congress should pull the plug on this because commodities do not meet the “prudent man” provision in ERISA.
The law states:
[F]iduciaries must act:
“with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. “
A “prudent man,” investing retirement funds for people who cannot contribute more to bail out losses, would not invest in such highly volatile instruments as commodity futures. The swing in commodity futures can rip your head off — you can go from a tidy profit in your positions to a stunning loss in the time it takes you to step out for a sandwich. When people are making retirement plans on this money, a prudent fiduciary in the private sector would advise (strongly) against retirement money being used to speculate on commodities.
If you look at the track record of CalPERS, you see that they sometimes lose a lot of money on their speculative plays, for example, debt instruments on building land in California and the southwest. They just lost a tidy sum on this sort of non-ERISA investment:
http://www.latimes.com/business/la-fi-calpers11-2008jun11,0,3712488.story
Calpers as far as I know is not subject to ERISA, it is a public plan. And just to be clear, (public) defined benefit pension plans like Calpers are for the most part guaranteed by the taxpayers. In other words, the participants contributions are capped, and the plan sponsor (through taxes) would make up any shortfall. In extremely rare cases a Plan sponsor could terminate a plan and pay off the beneficiaries, but it is not going to happen very frequently.In my third party administrative business I handle a few small defined benefit plans(30-40 million) for public groups, and while the information is freely available not many members of the public (taxpayers) have any idea what these plans cost to offer. Actually, what I am seeing as the growth investment now is investment in “infrastructure” funds. This is best described as a method of raising funds by which a taxing agency sells off a future stream of income for immediate gain, kind of an inter-generational rip off (sound familiar?). I have heard New Jersey has done this with its premier toll road, but I do not know if that is accurate. I just read the State of Florida is evaluating selling the future toll income from Alligator Alley (I-75).It seems that more European (Socialist) countries have resorted to this JG Wentworth type of fund raising tactic, but it is coming soon to a neighborhood near you.
That could be bad for me as a CA slave I mean tax payer. If CalPers loses so much it cannot make its promised retirement benefits to the pamperd state workers guess who has to fill in the gap.. ME!
Right and right.
The way the taxpayers are on the hook for the mistakes CalPERS might make is the #1 reason why they should be subject to ERISA - even moreso than private sector funds.
California’s public officials who play with state/county/city money in markets have a very checkered history of failures, some of them spectacular. Orange County, for example.
If you’re a state worker parhaps. If you’re a taxpayer, to hell with those state employees. They have been backing the jackasses who have put the state in this position, and my sympathy won’t be extensive.
No offense if you are a state employee. I’m sure there are exceptions.
I am not a state worker. What I meant was if CalPers falls short of the assets it needs to keep its promises to state workers by law the state must fill in the gap with tax payers money. For the past several years CA has had to send money to CalPers in the billions of $.
I hear ya. That is a problem. When it gets right down to it, I’m not a big fan of the state having to bail them out either.
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