Posted on 10/31/2008 4:07:47 PM PDT by george76
A pension fund covering 413,000 Colorado public employees and retirees has lost $10 billion in market value through mid-October.
The drop in the assets of the Public Employee's Retirement Association raises the prospect of higher contribution rates or lower benefits if the market doesn't improve quickly.
Colorado PERA had been hoping ...
(Excerpt) Read more at finance.yahoo.com ...
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My initial reaction to the credit “crunch” last year (apart from bailing on equities) was to wonder about the state pension funds. Everybody looked at me like I was from mars.
I downloaded the .pdf for my states fund. I don’t have any money in it at all but I thought it would make a good bellwether. I read it and didn’t like it a whole bunch 6 months ago. I read it again and I really don’t like it - all the “usual suspects” are there, along with a portion of the portfolio was allowed to trade in CDS (collateralized debt swaps) and MBS (mortgage backed securities, etc.
I know “I told you so” is never in order, but c’mon.
My initial reaction to the credit “crunch” last year (apart from bailing on equities) was to wonder about the state pension funds. Everybody looked at me like I was from mars.
I downloaded the .pdf for my states fund. I don’t have any money in it at all but I thought it would make a good bellwether. I read it and didn’t like it a whole bunch 6 months ago. I read it again and I really don’t like it - all the “usual suspects” are there, along with a portion of the portfolio was allowed to trade in CDS (collateralized debt swaps) and MBS (mortgage backed securities, etc.
I know “I told you so” is never in order, but c’mon.
(This is not advice) One of the nations top financial planners has noted to his clients to stay-away from muni’s for this reason.
I don’t have any advice (now) either, but then “where” does on invest their money??
I bought back into the S&P 500 (really the whole US market) on the 10th, and the international markets via the EAFE at a ratio of 10 per cent. Treasury money is good because it is “liquid” which is apparently the word of the day. My 401k isn’t down at all, and I’m buying modestly back in.
All the financial advice out there sez “don’t sell” - and they are correct. BUT - they don’t give advice for us dumb shits who decided to sell at the right time. I gotta be “right twice” in order for this to work out.
My brother who is going to vote for 0bama is retired teacher and so is his wife, they both think their retirements are completely secure.
From what I’ve read in recent years there are lots of state, union, and municipal pension funds that have been seriously under-funded over the years, because liberal bureaucrats and union hacks prefer to shovel the money into inappropriate uses. Now they will have a golden excuse to try to cover their tracks — they will try to blame all of their malfeasance over many years on the current dip in the markets.
“If you have a can that’s leaking two ounces a minute and you put an ounce a minute in it, it’s going to get empty.” He is describing his city’s coffers.
Vallejo’s unions contend that the city is solvent enough to meet its obligations. But last Friday a court disagreed, holding that the city is eligible for bankruptcy protection.
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/10/AR2008091002726.html
Same for folks that didn’t understand what a ‘mutual fund’ was composed of.
I remember that one of the big losers on the Enron implosion was a state teachers retirement fund, in I think Florida. There fund manager was buying Enron even after everybody said it was going to tank.
You are largely mistaken. There has been mismanagement for sure but the problem is the outrageous benefit levels. Legislators and taxpayers do not understand compensation. Legislators have been duped into believing that the employer contribution is the compensation value of the pensions. The employer cost is based on unrealistic assumptions by the pension boards. In reality, the compensation value of the pensions is equivalent to a large amount of deferred compensation at retirement. In my study of Colorado pensions, the golden parachute is worth about $500,000 on average, but much more for professionals and administrators. My study was based on the world before the mortgage mess. Now the compensation value has probably doubled.
The source of the problem with most pensions is that public employees can retire at early ages with no reduction in pension benefits. Social security enacts a penalty around 8% per year for early retirement. In contrast, Colorado PERA and many similar plans allow early retirement as early as age 50 with no reduction in benefits. Many individuals in my studies retired in the low 50s with 75% of their highest average salaries (often inflated).
My post was too imprecise but I meant to refer more to all the outrageous promises made i.e. benefit levels and early retirements without sufficient penalty, etc. Politicians just promise that stuff without any need to put in place funding that would actually pay for their promises - same seems to happen with a lot of union pensions and health care plans such as the UAW where promises made via contracts over many years are out of alignment with reality.
But I certainly yield to your evident expertise ‘cause I’m just a keyboard bloviator. :^)
Thanks geo.
Ruh Roh. That’s my Mom’s retirement. She taught in the DPS for 30 yrs and has no SS from her previous job (20+ yrs) because of the sexist way her employer calculated both my parents’ wages.
The present and past teachers should look into this mess.
The union bosses will likely not be helpful until enough pressure is put on them and the school boards.
Yes but nobody lives in their mutual fund. Not directly. While equities are a big part of millions of Americans portfolios - they need a place to live.
The big push now is for “renegotiation” of mortgages - which in my estimation won’t work. At least not for the illegal immigrant berry-picker who “owns” an option ARM mortgage on a $650,000 note. So, he gets a 30 year fixed at six, so what? The balance sheet looks better, but he’s still nowhere near being able to pay that. End result is the same.
This is all quite apart from the consequences of further yet killing what remains of contract law, since NOBODY is going to loan at reasonable rates IF the loan can be retroactively altered ex post facto. See: “Widgets on sale, $2.00, if we had any...”
Most folk have their primary residence paid off by then, so I think your argument is moot.
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