Stock Market Not Helping Pension Funds

February 10, 2012 - By admin

FEB. 10, 2012

By JOHN SEILER

California Pension Reform just suspended its attempt to put an initiative on the November ballot. It ran out of money — sort of like the pension funds themselves.

Meanwhile, the stock market seems to be recovering from the slump of the second half of 2011. As Profit Confidential wrote, “The S&P 500 Index is at the 1,350 level, which is where it was last spring. This, in my mind, represents an impressive recovery from the stock market correction that began last July.”

This is good news for California’s public pension funds, especially CalSTRS and CalPERS. In 2011, the funds soared in the first half of the year, but lost those gains in the second half, as we have reported here.

But actually the 2012 performance isn’t so hot. The following chart is from ChartoftheDay.com. It uses the similar Dow Jones Industrial Average. It shows that this “recovery” of the stock market is the worst on record, dating back 112 years.

Look for the red dot in the bottom left corner:

Bad news. No wonder CalSTRS, for example, recently scaled back its anticipated portfolio gain from 7.75 percent a year on average to 7.50 percent. CalPERS may well do the same.

The Stanford study said that a 6.2 percent rate — or less — is more realistic.

Of course, it’s always possible that the stock market could soar again, as in the 1980s.

Then again, recessions or depressions strike on average about every five to seven years. The last one hit us in 2007, already four years ago. If another recession hits in the period 2013 to 2015, without the economy and the market having recovered sufficiently from the 2007-09 slump, then these pensions funds will be in big trouble. It’ll be a double-recession whammy.

And taxpayers will be on the hook to make up the difference.

Voters won’t get to vote directly on pension reform this November. But they’ll get to vote indirectly. Because the $7 billion in tax increases Gov. Jerry Brown wants would just go to fund the pensions. So would the $10 billion in tax increases being pushed by wealthy liberal lawyer Molly Munger.

Do these initiatives guarantee that most of the money would go “for the children.”

Of course, and that’s just where it would go. The guarantees are iron-clad. The money goes to the kids. That is, after the pension funds take their cut. And after the pension funds take their cut, the only thing left will be a couple pieces of chalk.

 

 

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Comments(0)
  1. Beelzebub says:

    If not for the bailouts, ZIRP, POMO, money printing and borrowing the DOW would be at about 6500 right now. Sooner or later the bill is going to come due. And without more quantitative easing – which is nothing more than theft by the debasement of your currency – there is no way this ponzi can be financed. Look at Q4 earning for the S&P 500. Strip out Apple’s earnings and see what you got. When Apple pops (and it will) the avalanche begins. You are witnessing a fake stock market built on a sand foundation.

  2. Rex The Wonder Dog! says:

    Apple is $500 a share-it was at $11 in early 93 (??) and it split twice since then. Most amazing business comeback ever!

  3. Beelzebub says:

    Rex, did you hear that Fox business news axed Freedom Watch with Judge Napolitano?

    Anyone who gets close to the truth gets dumped.

    And all we’re left with are presstitutes.

  4. Rex The Wonder Dog! says:

    Rex, did you hear that Fox business news axed Freedom Watch with Judge Napolitano?

    I just watched Napolitano tonight.

    Judge Napolitano and Dylan Ratigan are the only two news programs I watch these days……….so much for FBN, don’t really watch it except for Napolitano, cross them off the list.

  5. Beelzebub says:

    “I just watched Napolitano tonight”

    You won’t be watching him much longer.

    http://dprogram.net/2012/02/10/freedom-watch-has-been-cancelled/

    The Judge stepped on too many toes with the truth. He made too many people actually think. The oligarchs wanted him out.

    They want to you get your news from Wolf Blitzer and Brian Williams or from the other presstitute broadcasts that keep the masses confused and in the dark.

  6. Rex The Wonder Dog! says:

    Sad day-I LOVED the Judge (and Dylan).

    I hate to say it, but the entire country is on a slope to destruction, and I think we may not recover. A 5 year depression/recession??? No end in sight??? When was the last time that happened?? In 129 up until the last 1930’s-less than 10 years total. I predict this depression will last just as long ans we will NEVER see the kind of growth we had in the 40’s, 50’s, 60’s and even the 1970’s. When I graduated from college in the mid 1980’s Ronnie Raygun said the country was growing like gang busters, yet many of my friends could not find jobs paying more than $21K per year STARTING, with 1 week of vacation and 5 days of sick leave. Teachers in the mid 1980s were TSARTING at $30K-$45K depending on how many post graduate college credits they had, with 15 weeks of vacation and top of the line benefits. So the private sector has been going downhill since the 1980’s while the public sector has been moving their employees into the top 5%, and in the case of GED cops and ff’s into the top 1%.

    I don’t think we are coming back this time, certainly not to the standard of living we should. The ONLY people who will have a decent standard of living will be public employees, while the ones paying for that standard of living will be getting an even lower standard than they have now because of the cost to pay public employee comp.

    Jerry Clowns tax hikes are toast, won’t happen. But watch, he will try AGAIN after they fail. Just as he has done after Anrold’s same tax plan failed. He will keep coming back no matter how many time his plans fail because he won’t make the HARD choice to freeze or even lower trough feeder comp.

  7. Beelzebub says:

    Hey rex, why would the ponzi scams that caused the depression stop if no one is punished for them?

    If all the sudden the cops stopped enforcing ‘breaking and entering’ or burglary laws there would be a huge spike in residential robberies, right?

    So if the financial crime bosses can package up boxes full of horse turds and sell them to you as swiss chocolates – and get away with it – why would they stop doing it???

    The Too Big To Fail banks KNOWLINGLY laundered HUNDREDS OF BILLIONS of illicit drug money for the international cartels in the last 5 years, thereby conspiring to import and distribute TONS of dope into the country! This is documented in the civil court records. Yet not one of the bastard banksters did a day in jail over it! The TBTF’s were actually involved in the PURCHASE OF AIRCRAFT USED TO SMUGGLE DOPE ACROSS THE US BORDER for the international cartels. None of them did jail time!!! They paid a small fine which amounted to about 20% of the profit they made off the laundered money!

    But some poor schmuck who gets caught selling a baggie of weed on the street corner goes to jail for 2-5 years!!!

    So if there is condoned anarchy at the top – where the banksters can scam the system without any real punishment – why would any of this stop????

  8. Beelzebub says:

    I bet this is the one that got Judge Napolitano fired:

    Anybody in the public eye with an audience who insinuates that the system is crooked is toast.

  9. Bob says:

    Faux is a stink hole of statism.

    It always amazed me that Napolitano even had a show on that network.

    And I can’t figure out how he managed to stay on as long as he did.

  10. Bob says:

    “Jerry Clowns tax hikes are toast, won’t happen.”

    Mr. Dog, I sincerely hope you are right.

    But you’ve got to remember the voters of Colliefornia (as Ahnode sez) passed the Bullet to the Head train and that stem cell boondoggle.

    And who voted Clown Brown into office? And who voted into office all those corrupt, criminal, lying thieves in the legislature?

    I don’t hold out much hope for voters who think bonds are free money.

  11. Bob says:

    “…Wolf Blitzer…”

    Hah! What a name. I bet he made that name up for the first Gulf War. Sounds like he should be commanding a German U boat. (The Wolf Packs of WW II.) He also goes by the name Zev Barak when he writes for Israeli newspapers.

    And little Brian Williams, possibly the Queen of Prestitutes.

    They make millions spreading the oligarch propaganda.

    And I tell ya Bub that ain’t gonna change. For every one Wolfie or Brian there’s 100,000 more waiting in line to replace them in the MSM.

  12. Beelzebub says:

    “And I tell ya Bub that ain’t gonna change. For every one Wolfie or Brian there’s 100,000 more waiting in line to replace them in the MSM”

    Oh, no doubt, bob. They’re all whores who couldn’t care less about getting the truth to the people. Anybody who thinks we actually have a ‘free press’ in America is smoking something much stronger than a Marlburo. The whole purpose of the MSM is to keep the masses confused and in the dark. Judge Napolitano was one of the few to whom the masses could turn for some truth. Now he’s gone. Look at the GOP primary. It’s been like a circus. A little Peyton Place. And these are the best that they can offer to us? :D We’re headed into November 2012 with another chance to cast a vote for the lesser of two evils. How could any normal person take any of this crap seriously?

  13. queeg says:

    Napolitano was loud and mentally conflicted..in prime time a bore..

    The nailed Glen Beck…. and Lou Dobbs….matter of time….

    Your media betrays you daily…Fox wants the political ad dollars…wake up….you are getting milk toast for “moderate” voters….

  14. Rex The Wonder Dog! says:

    Skippy, according to the graph you posted, and I am not in anyway suggesting it is or is not accurate, the unemployment rate today is HIGHER than when Obama took office 3 years ago. So if you’re suggesting things are getting better you may want to go back to college and take Econ 101.

  15. SkippingDog says:

    According to the graph explanation that John Seiler didn’t bother to post along with the nice picture:

    “The Dow made another post-financial crisis rally high Thursday as it approached the 13,000 level. To provide some perspective to the current Dow rally that began back in early October 2011, all major market rallies of the last 111 years are plotted on today’s chart. Each dot represents a major stock market rally as measured by the Dow. As today’s chart illustrates, the Dow has begun a major rally 28 times over the past 111 years which equates to an average of one rally every four years. Also, most major rallies (78%) resulted in a gain of between 30% and 150% (29.8% to 150.5% to be exact) and lasted between 200 and 800 trading days (9.5 months to 3.2 years) — highlighted in today’s chart with a light blue shaded box. As it stands right now, the current Dow rally (hollow blue dot labeled you are here) would be classified as well below average in both duration and magnitude.”

    That means his claim that this rally is underperforming is either intentionally misleading or misstates the facts posted by the Chart of the Day people. As noted above, the vast majority (78%) occur during a period of 200-800 trading days. I haven’t bothered to count on the calendar, but I don’t think we’re anywhere over 100 trading days since this rally began last October. If it continues in duration, we’ll see how much the market improves. If it’s a real rally and we are focusing on history, that number will be somewhere between 30% and 150% of what it was last October.

    It would be nice if you guys bothered to put your claims in context, but it wouldn’t support the agenda you’ve chosen to pursue.

  16. Beelzebub says:

    rex, somebody’s fudging the numbers somewhere because if you compare the total state personal income tax revenues for the last 4 quarters of 2010 and 2011 you would find that 2011 generated a full $600M LESS in income taxes than in 2010. Yet, at the same time the state tells us that California created an average of 20,000 new jobs for the last 4 months of 2011. Well, common sense says that if the U/E rate went DOWN in 2011 with more people earning wages than in 2010 – then personal income tax revenue should be HIGHER, right??? Then why was it LOWER by $600M in the last 4 months of 2011 compared with 2010??? And the latest revenue numbers for Jan. 2012 really look bad. They came up short by $1.2B. ALWAYS look at the tax receipts. I think the U/E numbers are being gamed for Obama’s political benefits. I expected this crap to start happening in 2012 with the elections only 9 months away!

  17. Beelzebub says:

    Hey skippy – if things are improving why did CA come up $1.2B short for the month of January 2012??? Didn’t you read Chiang’s release last Friday???

    Here are the reasons for the stock market rally: Bailouts; ZIRP (zero interest rate policy; Quantitative Easing; Borrowing.

    You are observing a false stock market build on a foundation of goo.

    Anybody who leaves his or her money in the market overnight is playing with a rattlesnake.

  18. SkippingDog says:

    You are certainly aware of the fact that our state income tax revenues reach their highest flow levels during tax season, which will be coming up in the next 8 weeks.

    People are just now getting their 1099’s in the mail, which is why Chiang recommended deferring some payments until the second quarter.

    Your explanation of the market rally, if there really is one in progress, doesn’t line up with the facts. The S&P and broader indexes aren’t disproportionally weighted in financial sector or automotive stocks, which were the industries that received the bulk of the TARP bailouts. American corporations are sitting on record amounts of cash on hand, so the zero interest rates really don’t have much effect either, since you don’t need to borrow money and pay interest if you have it coming out the ears of your company.

    Using your rationale, all equities markets are built upon nothing but “goo,” since markets are an imperfect construct that attempt to place valuations on things and activities that are not always measured objectively – and for which objective measurement and valuation may not be strictly possible.

    It’s certainly true that putting your assets in any market exposes you to some level of risk, but then so does burying them in the backyard or converting all your holdings into a commodity such as gold.

  19. SkippingDog says:

    No, Rex. It doesn’t show that at all. If you’ll follow the red bar that corresponds to January of 2008, you’ll find that it intersects the unemployment line at slightly over the 8% mark. If you look at where the unemployment line is today, you’ll find that it’s also slightly higher than the 8% mark.

    The important thing to notice is that the trend line in job losses was RED and getting redder throughout the Bush Administration and the job losses began decreasing when Obama entered office.

    You’re a reasonably smart guy, so don’t try to get too cute with your trend analysis. Neither the numbers nor history are on your side.

  20. SkippingDog says:

    Correction on my previous post, Rex. Follow the Red bar that corresponds to January of 2009, when Obama entered office. To be really accurate, you should probably look at the Red bar that corresponds to February of 2009, since he didn’t enter office until late in the month of January and February was the first full month of his presidency.

  21. Rex The Wonder Dog! says:

    No, Rex. It doesn’t show that at all. If you’ll follow the red bar that corresponds to January of 2008, you’ll find that it intersects the unemployment line at slightly over the 8% mark. If you look at where the unemployment line is today, you’ll find that it’s also slightly higher than the 8% mark

    I think i said UE was higher today than when Obama took office, Skippy, according to the graph you posted, and I am not in anyway suggesting it is or is not accurate, the unemployment rate today is HIGHER than when Obama took office 3 years ago and today the UE rate is the exact same as it was in January 2009, so the economy has not improved, despite trillions of borrowed money tossed into it, than it was when Obama took office.

    UE in CA-the true UE rate, the U-6 rate- has been at or around 22% for over 30 months. No one can say things are better today than they were in 1-2009. The real estate market is still in the toilet , for 5 years now and there are still millions of homes under water which means it will not improve for at least 3-5 more years.

    We are a long way from a “recovery”. Is it Obama’s fault”” He is n charge. I don’t know if anyone could or will be able to fix the problem since it is structural, shipping jobs overseas, and compensating government employees 10-20 times above market for their skills.

    Until special interests are controlled-Big Business and public unions- we won’t recover.

  22. Beelzebub says:

    “You are certainly aware of the fact that our state income tax revenues reach their highest flow levels during tax season, which will be coming up in the next 8 weeks”

    That still doesn’t explain why income tax revenue was $600M less for the last 4Q’s of 2011 as compared to 2010. If jobs are being created that would mean MORE monthly income related revenue would be coming in. It’s not. The exact opposite is true. There is LESS monthly revenue. U/E is dropping because people are falling off the U/E rolls – but not finding work. If more people were working – there would be more revenue. Think about it.

    “The S&P and broader indexes aren’t disproportionally weighted in financial sector or automotive stocks, which were the industries that received the bulk of the TARP bailouts”

    All corps benefit from ZIRP. It’s pretty hard not to generate lots of cash when you can borrow @ 0% interest and get safe 2.5% or more ROI.

    “Using your rationale, all equities markets are built upon nothing but “goo,” since markets are an imperfect construct that attempt to place valuations on things and activities that are not always measured objectively – and for which objective measurement and valuation may not be strictly possible”

    The markets doubled when there was virtually zero economic growth. The GDP has been dismal for 4 years – avg. down around 1%. When markets doubled in such an economic environment it’s only through manipulation and artificial stimulus. Like growing the federal debt to over $15T. Apple is making money off offshoring jobs and slave labor. Apple will pop in the next 12 months. When it does it’s take the entire S&P down with it.

  23. Rex The Wonder Dog! says:

    Apple broke the $500 per share barrier today………….

    http://www.latimes.com/business/technology/la-fi-tn-apple-breaks-500-20120213,0,4093057.story

  24. Beelzebub says:

    “Apple broke the $500 per share barrier today…………”

    That’s what offshoring jobs and slave labor will buy you.

    It’s only a matter of time before Apple screws up and falls like a rock.

  25. Beelzebub says:

    LMAO.

    “China’s Administration of Industry and Commerce has started confiscating any iPads it finds for sale after the verdict of the Apple’s court case with Proview, reports DigiCha.

    A quick refresher — Apple bought the rights from a Chinese company called Proview to use the word “iPad,” but Proview claims that their agreement didn’t include the rights to do so in China. The courts agreed and now Chinese officials are enforcing it”

    http://www.businessinsider.com/chinese-authorities-are-removing-ipads-from-store-shelves-2012-2#ixzz1mIWizkWG

    I would die laughing if China banned CrApple iPad sales.:D

    You play with the devil and you get screwed!

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