Can’t Retire

10 01 2013

Sacramento, Minneapolis, St. Louis

Santa Rosa (Calif.) Press-Democrat:

Teachers’ retirement fund to divest from gun makers

The nation’s largest teacher pension fund took the first step Wednesday toward divesting from companies that make guns and high-capacity ammunition magazines that are illegal in California.

State Treasurer Bill Lockyer made a motion to begin the divestment process after pension fund officials determined that the fund invests in the owner of a company that manufactured one of the weapons used in the Connecticut school shooting. The California State Teachers’ Retirement System’s investment committee unanimously approved the motion.

(snip)

The pension fund has investments in private equity firm Cerberus Capital Management LP, which owns the manufacturer of an assault weapon used at Sandy Hook Elementary School in Newtown, Conn. The pension fund also owns shares of Sturm, Ruger & Co. and Smith & Wesson Holding Corp., two publicly traded gun-makers.

Then what?  Where do they expect to park that money to find anything close to a return?  I really don’t anticipate that much outside of firearms stocks and American T-Bills will be shakin’ in 2013.  Maybe that’s the answer:  I can see Obama’s hand in the background here.  Maybe he wants CalSTRS to park all its money in T-Bills.

Strangely, Cerberus is in the news locally today, too.  SuperValu, the Minneapolis-based supermarket chain that owns the Shop n Save locations in and around St. Louis, as well as all Save-a-Lots, is going to sell most supermarket chains it owns to Cerberus, but not SnS or SAL.  With last year’s droughts expected to jack food sky high, food might be another good business to be in at least temporarily in spite of it being a low margin business otherwise.  This means that because it will be involved in both food and guns, Cerberus at least through much of 2013 will be rolling in money.  Yet, CalSTRS doesn’t want to be invited to that party.

A certain someone reading these words should probably put off those retirement plans for a few more years.

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3 responses

11 01 2013
Bon, Tax Slave of California

Look, I’ve assumed for years that my pension is already gone. Looks like I’m not wrong about that:

SacBee, Dec, 2012:

the situation at CalSTRS is dire. Its unfunded liability stands at $65 billion. To make up for that shortfall, CalSTRS actuaries say the fund will need an additional $4.5 billion cash infusion annually for the next 40 years.

A report from the state controller earlier this year found that the teachers retirement system consistently ignored evidence of fraudulent payments, most of which went to highly paid school administrators, even when its own computer alerted the system to problems.

http://www.sacbee.com/2012/12/24/5073796/legislature-cant-put-off-reckoning.html#storylink=cpy

Retire? What’s that? I’m enslaved to the UCs for life…

Bon

11 01 2013
FLPatriot

Don’t mind seeing the teachers union make a fool of themselves. Maybe when the teachers loose a large portion of their pension because of moves like this they will look to decertify the parasitic union.

12 01 2013
rjp

All these pension plans are under funded because they funded them in the boom years based on ridiculous rates of return. I think California was using greater than 8%, Illinois was using 7.75% as late as 2010.

Now we can look at historical rates of return until we are blue in the face and think “wow, we can do that”. But it is not that easy.

The S&P 500 lost 37% in 2008, in 2009 it made 27%, then in 2010 15%.
And it was still down ….

-37 +27 +15
1500 945 1200.15 1380.17

(I used 1500 because it is a nice round number to start with. And these changes are better than the real S&P are because my numbers include dividends (Compound Annual Growth Rate (Annualized Return))).

-37%+27%+15% Yeah I know the equation is wrong …. But it still does not end up equaling up 5%.

The 37% down year can not be predicted with absolute accuracy.

And it takes this:

-37 27 15 8.7
1500 945 1200.15 1380.17 1500.25

To get back to even.

The S&P 500 composition changes daily for nearly every single stock in it because the divisor changes daily. This requires an index fund to trade to maintain it’s composition i.e. trade daily. This results in transaction costs that are never reflected in the actual S&P 500 (because it is just an index).




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