Posted on 01/07/2024 11:11:09 AM PST by Kaiser8408a
California is experiencing a pension inferno!
One of the biggest public pension plans in the US plans to borrow tens of billions of dollars to maintain liquidity instead of triggering a fire-sale of its assets.
Bloomberg reports the roughly $318 billion California State Teachers’ Retirement System (CalSTRS) plans to borrow $30 billion, or about 10% of its portfolio, instead of raising funds through an asset sale that might trigger fire sales.
Borrowing to lever up its real estate-laden portfolio when CRE returns are negative??
Calstrs board members will review the first draft of the policy next Thursday. If approved, the leverage would be used “on a temporary basis to fulfill cash flow needs in circumstances when it is disadvantageous to sell assets,” a CalSTRS policy document stated.
The need to increase leverage comes after a report from the Financial Times last April explained that CalSTRS was planning to write down the value of its $52 billion commercial real estate portfolio after high interest rates crushed the values of office towers.
At the time of the FT report, CalSTRS Chief Investment Officer Christopher Ailman told the media outlet that:
“Office real estate is probably down about 20 percent in value, just based on the rise of interest rates,” adding, “Our real estate consultants spoke to the board last month and said that they felt that real estate was going to have a negative year or two.”
FT noted real estate makes up about 17% of Calstrs’ overall assets.
We’re sure Calstrs is one of many pension plans under pressure from the CRE downturn. Also, regional banks have high exposure to CRE and are still not out of the woods.
Remember these “best minds in real estate.”
(Excerpt) Read more at confoundedinterest.net ...
Time for California to revert to territorial status and lose all representatives in the Senate and the House.
Slippery slope
Heh, left wing “eddikators” apparently are not able to teach mere high school math to their students, and one wonders why their pension funds have failed?
Remember, children—after you have maxxed out all of your credit cards go to your local bank and ask to borrow some more money—they will love having you as a customer.
Lol.
The pension funds are just insolvent—failed is when they run out of cash and can’t get it anywhere.
LOL! Are CalSTRS and CalPERS still pretending that they’re getting 8 percent returns?
They “hedged” their risky investments for years with long term treasury securities—at 0.5% interest.
The fund is a total dumpster fire.
Lol.
How I wish I could get 8 percent returns.
Hey, I just got an offer to invest in a share of the toll roads in Pennsylvania. A 22% guaranteed return ;) All they want for "investor verification" is my bank account number. What a deal! How can I turn that down?
Err, Ummm, mumble, mumble...
A shave and a haircut... two bits.
Cue up movie margin call.
Great movie—despite all the “expert” claims to the contrary—nothing has been fixed.
If anything it has gotten worse.
The Fed is like a hockey goalie playing a fifteen year hockey game against an all-star team with no other defenders.
When somebody starts talking 6 percent, my financial spidey-sense tingles...
“Known to the state of California”
Bookmark
In part explains the push to get folks back into the office v WFH.
Wow! All those investments in ESG companies must not have given them the returns they wanted! That and refusing to invest in corporations based in many Red States.
This will result in more tax avoidance and evasion by retired Californians living in Oregone or the state of Washington for spring/summer/and the fall, and shadow living in their former homes in California.
Washington state does not have a personal or corporate income tax. Many Ca. tax evaders live in Vancouver, Washington and pay no income or corporate taxes and then do their major shopping at Costco and other stores in Oregone with no sales tax.
The other giant Kalifornia pension fund is the Kalifornia Public Employees’ Retirement System (CalPers). The State workers union is so powerful they managed to get a pension guarantee into the Kalifornia Constitution. When (not if) the CalPers fund is in trouble, pensions will be paid out of the general fund. The Kalifornia taxpayers are on the hook for each and every pension.
If CalStrs has the same proviso, the Hussein/Biden Regime economy could reek havoc in Kalifornia. If any Kalifornia democRAT office holders desire to remain in office, they will bend over for these massive unions. The ongoing exodus of those who can move out of Kalifornia will just increase. There have been articles about all the CalPers retirees leaving Kalifornia for Nevada, Texas, Idaho, etc. They do not spend all that money in Kalifornia. I can see a time when Kalifornia will have its own Atlas Shrugged moments, only there will be no magical train. Just search the phrase “train to nowhere.”
‘Cause I’m the taxman
Yeaaah, I’m the taxman
And you’re working for no one but me (taxman!)
-The Beatles
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