America's 2 largest pensions (Calpers and state teachers) lose 25% of portfolio, 100 Billion

[Liberal_in_LA]

http://www.latimes.com/business/la-fi-calpers22-2009jul22,0,5416427.story

Almost $100 billion in losses for California's biggest government pension funds
CalPERS reports its portfolio has shrunk 23.7% in the last year while the State Teachers' Retirement System says its holdings are down 25%.

By Marc Lifsher
10:32 AM PDT, July 21, 2009

Marc Lifsher Reporting From Sacramento -- California's two huge government pension funds reported whopping annual losses today of about one-quarter of their portfolios.

The California Public Employees' Retirement System, the largest in the nation, today posted a preliminary drop of $56.2 billion for the fiscal year ended June 30. The second-ranked fund, the State Teachers' Retirement System, reported a preliminary loss of $43.4 billion.

The loss for CalPERS is the second in a row for the country's largest fund. A year ago, CalPERS reported an $8.5-billion loss as the severe recession began to take hold.

[mike_c]

1. interestingly, CALPERS sent out reassurances last year...

...that last year's losses would not effect the retirement fund in any meaningful way, and that benefits were set by law, so no worries in any event. I wonder whether anyone in Sac is a little more nervous now than then?

[Journeyman]

2. Ah, but there's a money shot in the fourth and fifth paragraphs . . .

The tremendous drop in value is expected to have a direct effect on the amount of money that the state and about 2,000 local governments and school districts must contribute in coming years to pay for pensions and healthcare for 1.6 million government workers, retirees and their families.

As income from the pension investments fall, the governments would have to make up the difference to meet the state's pension obligations.

So unlike a private citizen such as myself, who saw my retirement fund drop by similar measure and for the same reasons, there'll be no "magic" barrel of money to pull sustenance from when I'm old.

[Liberal_in_LA]

14. 'magic barrel'. love it. Nope, the magic barrel does not exist for most folks

[Phoebe Loosinhouse]

3. But Goldmans Sachs made lots of money by playing both ends against the middle

Earn Like Goldman Sachs, a ProPublica How-To
by Sharona Coutts, ProPublica - July 16, 2009 2:02 pm EDT

Goldman Sachs has proved once again that it knows how to make money. Wednesday’s announcement of a record quarterly profit of $3.44 billion has spurred debate over how the bank did it.

In addition to making money via its own trades, Goldman profits by advising clients about deals. Some of that advice has proved quite savvy.

As we reported last year , one of Goldman’s money-making strategies was to encourage some clients to bet on declines of the creditworthiness of a range of states — including California, New Jersey, New York and Florida. Goldman advised hedge funds to take the bets by buying credit default swaps, the insurance-like financial instruments that have been blamed for contributing to the financial meltdown last fall .

The strategy angered California Treasurer Bill Lockyer because his state was paying Goldman millions to help market the same bonds that Goldman was advising other clients to bet against.

complete story at link
http://www.propublica.org/article/earn-like-goldman-sachs-a-propublica-how-to-716

[bemildred]

4. 25% is not bad really.

I know lots of people down a lot more than that.

[lindisfarne]

5. Yes, and as #2 points out, people in the programs won't suffer because municipalities etc. make up

the difference.

[bemildred]

6. Well, they are going to have to find something to tax to do that. nt

[lindisfarne]

7. Or cut back on services, employees, etc. n/t

[bemildred]

8. Which means less tax revenue etc. etc.

Sort of an economic black hole.

[lindisfarne]

9. Tell that to your city. They do have legal obligations to pay pensions.n/t

[bemildred]

10. That's why we have bankruptcy laws, for those "special occasions".

Just ask the UAW about how that works.

[lindisfarne]

11. The city has to first declare bankruptcy. I'm not sure why you're arguing with me. Your argument

breaks down in that you're forgetting that the pensions ADD to the money people have to spend, which generates taxes.

Anyway, good luck in life.

[bemildred]

12. Indeed it would.

I have no idea why you are arguing with me either, so that seems fair.
Good luck in your life too.

[Stinky The Clown]

13. With what? IOUs?

Ahnuld has set the stage for them. And after setting the sage, he's bled them dry.