Yes, 103% No typo! Yes, 3% more than the government-employee pension giant invested!
Officials at Calpers confirm that it currently expects to report paper losses of 103% on its housing investments in the fiscal year ended June 30. The Wall Street Journal has a gripping story today detailing CalPers bad bets on real estate. In part, it says …
Calpers is now warning California’s cities, towns and schools that they may have to cough up more money to cover the retirement and other benefits the fund provides for 1.6 million state workers. Some towns are already cutting municipal services, and at least one is partly blaming the Calpers fees.
Calpers in recent weeks said it expects to report paper losses of 103% on its housing investments in the fiscal year ended June 30. That’s because Calpers invested not only its own money, but billions of dollars of borrowed money that must be repaid even if the investment fails. In some deals, as much as 80% of the money invested by Calpers was borrowed.
In the latest wrinkle: To generate sorely needed cash, a troubled Calpers venture known as LandSource recently started the process of selling land during the worst property market in a generation. Calpers could potentially lose nearly $1 billion on LandSource, a $2.5 billion deal completed early last year, and one of the priciest U.S. residential-land transactions ever. LandSource is now under bankruptcy-court protection.
To read more, CLICK HERE!
Highlights of November’s DataQuick housing reports …
- O.C. foreclosures again tumble
- Winners and losers by ZIP code
- O.C. homebuying rises for 5th straight month
- O.C. home price down 31% in a year
Other real estate news …
- O.C.’s newest beachfront listing: $36.9 million
- O.C. homes appraise 18% cheaper in a year
- Slice of Nixon’s Western White House? Only $15 million
- Bankruptcy sought for ocean-view homes in San Clemente
- Crystal Cove homesellers stubborn on pricing
- Higher-priced O.C. homesellers continue to discount
- Calif. home prices off 28.9%, nation’s worst drop
- O.C. brokers bet $2 million on luxury-home office
wOW. tHERe ArEN’T CALiPERS bIg enOUgH to MEAsuRE thiS kInd OF loSS!
Oh yeah and I’d like to add, they CalPers and Landsource sound like a bunch of morons.
blogger I covered this one yesterday- lets get on with the
current news shall we?- fraudie and fannie are back
and they have all new plans to save our poor cash strapped
home-debtors- I hope they put a warning label on the new
loan “modification” paperwork… for those of you who are
underwater and are looking for help from uncle sam- please
be forewarned- uncle sam is really a flim flam man- who is only
beholden to the thousands of lobbyists who hover over
washington like a flock of buzzards–
we’re the government and we’re here to help you.. llooll @ribsplitter
http://mrmortgage.ml-implode.com/
I have been trying to say this for many many months, this is what happens with DERIVATIVES. they are a scam in itself. not so much of a conspiracy theory any longer is it? Maybe the only conspiracy theory is what the banks and Government are telling you. How many times do you have to be lied to? How many times are you going to go back to the same people who did this to us and think they are going to “fix it”?
It is lack of understanding, the dollar is DONE, even Bloomberg admits it. Unless the people actually take action, it is going to get worse. The IMF chief said today there is going to be riots across the globe and they have already started. Helicopter Ben has usurped ALL of his Fed. Reserve board and is IGNORING the Congress. They will not even tell us where 2 TRILLION dollars of OUR MONEY went and you trust them and think they have your best interests at heart and are trying to save this country?
Even, I can’t help here. Get the pitch forks ready.
We don’t need no stinking handcuffs.
Mr. ZIRP
Serving Japan for 20 years
What does this mean? Higher taxes for us?
Well this sucks now doesn’t.
“Calpers invested not only its own money, but billions of dollars of borrowed money that must be repaid even if the investment fails. In some deals, as much as 80% of the money invested by Calpers was borrowed.”
oh brother, so this is just the beginning folks
all the money is gone
now Calpers is warning you to pay up !
talk about a risk free investment
and an lllooolll@ribsplitter supreme
bartender,
another round of margin calls
easy on the insolvency…
TYPICAL GOVERNMENT OPERATION.
CORRUPT AND INCOMPETENT.
Looks like everyone was drinking a Madoff Martini………….
the domino effect is in FULL swing.
whats next? any guess?
California is facing ths prospect
of paying bills with IOUs…..
yep you heard that right….
hey GM and Ford, you might want to hold on to that IOU
it’s an entire fleet of cars lllooolll@ribsplitter
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYKUwelCoSxc
“California, the most-populous U.S. state, will run out of money as soon as February unless lawmakers end an impasse over how to replace revenue lost amid the recession. Schwarzenegger’s administration has said the state may begin paying bills with IOU notes as early as February, a measure that has been utilized only one other time since the Great Depresssion. “
know I already posted this but for those that missed it–
this is truely LOL ribsplittingly hilarious……
http://www.theospark.net/2008/12/fred-thompson-explains-bailouts.html
for those who don’t believe in deflation
with a fiat currency
check out this video from 1933
the other time our government
printed money at a mind boggling pace
and all we got was a decade deflation
http://www.youtube.com/watch?v=99Dzdc1H0wM&
Just like Madoff, the Calpers debacle was easy to see coming:
http://wcvarones.blogspot.com/2008/07/calpers-magical-performance-numbers.html
Guys, there is no rebound in the horizon. I don’t see housing hitting a price bottom in 2009 and we’ll be lucky if the bottom is found in 2010.
There is a far reaching and profound domino effect that is destroying consumer confidence in leaps and bounds. Consumer psychology does not turn around over night. It’s going to be a while before the following things happen:
1. lending guidelines become easier
2. consumers optimism outweighs pessimism
3. stability in the financial markets
4. stability in the employment market
Renters, don’t hold your breath. I have never seen an employment market look so bleak. Two of my family members who were formerly making 6 figures at Fortune 500 companies have just been laid off this week. These people were established workers at the peak of their careers.
But Dr. Paul was crazy right? LOL. Keep listening to the same people who got us in this mess. Have we forgotten our history and the biggest enemy to the Republic, the BANKERS. Go read your history. Why is it always the same names and groups involved?
“CalPers losing 103% on its housing bets”
This whole thing is insane!
They could have spent the billions on a much safer bet then housing.
For instance, they could have purchased 2 billion lotto tickets and received a better return than they did with housing.
The overwhelmingly amount of ignorant greed that this country is saturated with is driving the US into the ground.
As the world watches Bernanke tear up the dollar while making up his own rules on the go, Asia and Europe will start to distance themselves away from our madness and we will be left to wallow in our own stench.
If we could stop bailing out deadbeats, stop spending more than we make and stop the government from spending more than it takes, this country could finally start a world class recovery.
Unfortunately, we’re headed in the exact opposite direction.
Move over CalPers, California Cuts Off $3.8 Billion Funding Over Budget
“Officials said it may cost tens of thousands of jobs in a state already reeling from the housing market’s collapse”
“The state is out of money, and the special funds we rely on to tide us over are fast running dry,”
http://www.bloomberg.com/apps/news?pid=20601015&sid=au67fJg8K6J0
Plus, the state wants to start paying its bills with I.O.U.’s
Landscapers, carpet cleaners, construction firms and food service companies will be the first to receive the worthless pieces of paper.
http://abclocal.go.com/kfsn/story?section=news/state&id=6541375&rss=rss-kfsn-article-6541375
The angst about this doesn’t make sense: CalPers far outperformed the average California homebuyer 2005-2007 who put down 10%, thus losing 300% on their “investment”.
Just to keep the $1 billion loss in perspective, CalPers’ asset base is over $300 billion. So losing $1 billion accounts for less than a 0.35% loss. Yes that is correct. Not a 1% loss, a 0.35% loss. If they make 1%, they will increase their asset base by $3 billion.
Perspective is a wonderful thing, don’t you agree?
Mav-
You bring up a good point. I’ve been so focused on all the government printing presses creating inflation down the road, I never even keyed in on it creating DEflation.
So in an inflationary environment you want to dump dollars and buy assets.
Does that mean in a deflationary environment you want to dump assets and stash cash?
Lee, what do you think?
Marcia,
Here is the deal with the printing press. The government can print money, but they can not force people and banks to use that money. With a fiat currency that can be printed to oblivion you can have deflation if the following occurs:
a. banks don’t want to lend
b. borrowers don’t want to borrow
c. borrowers are so in debt and effectively insolvent that they can’t borrow productively (in a productive manner that allows them to pay the debt back)
I think all 3 are in play now and this spells deflation. The banks can arbitrage the cash with no risk and create money to improve their balance sheet. By doing this they can slowly get healthy.
In a deflationary environment you want to hold cash. I think this will last at least 2 years, possibly 3 years.
Here is the caveat: if the rest of the world starts to sell off the US Dollar we might see huge inflation in goods that are imported into this country due to the weakness of the dollar. If countries buy the US dollar or stay in the US dollar because they feel it’s safer than their own currency then all we will see is deflation. Either way we will see deflation in US assets. (like housing) You should not be concerned about overall job losses, you should be concerned about overall wage losses….. which appears to be picking up steam.
Marcia,
Taxpayers eventually could pay as CalPERS loses billions.
Since the fiscal year began July 1, CalPERS’ portfolio has shrunk from $239.2 billion to $192.7 billion.
If that decline holds true through next June, CalPERS’ staff estimates that employers will have to increase contributions by 2 percent to 4 percent of employee payroll.
http://www.sacbee.com/taxes/story/1336526.html?mi_rss=Taxes
How was California’s largest public pension fund able to partake in such risky investments?
The whole things nuts!
Marcia- are you by any chance a state employee? if you are
I hope you have a separate 401k because this is just
another government run program thats doomed to fail–
read calpers home page- assuring its members theyre safe-
because they are protected by the “law” lloolll- note they dont
mention the 1 billion dollar loss anywhere- dont want to scare anyone
lets read it together shall we…
CalPERS is Resilient in Market Downturns
Our economy is experiencing extraordinary conditions that are affecting all investors and markets. The impact is global in scope. While we know that these conditions can be unnerving, here are some important points to keep in mind:
We’re meeting our obligations today, and will meet them tomorrow.
WOW- YOU SAFE TILL AT LEAST TOMORROW
We continue to issue benefit checks of $10 billion dollars a year to over 400,000 retirees without interruption. We have never missed a benefit payment, and we recently received the highest rating by Standard & Poor’s for our ability to meet our obligations. It is important to remember that your retirement benefits are protected by law.
WE PAY 10 BILLION A YEAR– SO ONE BILLION IS 10% OF THE TOTAL YEARLY PAYOUT- JUST TO PUT IT IN PERSPECTIVE–
PROTECTED BY “LAW”- SO IF THEY GO BROKE “THE LAW” WILL PAY YOU– LLOOLLL
The impact to CalPERS has been largely a fluctuation of market value of assets.
The impact of the markets on CalPERS has in large part been a fluctuation of the market value of our assets. This is expected to continue until the private sector credit markets become unfrozen.
YEAH WHAT IF THEY DONT BECOME “UNFROZEN” FOR A YEAR OR TWO
Meanwhile, we’re staying on course with short-term tactics and long-term strategies. In real estate, we began taking actions in 2007 to calculate realistic value, analyze the capital structure, restructure debt, and reduce leverage.
2007? HELL THAT WAS TWO YEARS PAST THE BUBBLE PEAK
In private equity, we sold off a portfolio of funds at the peak of the market. We are seeking good buying opportunities for when the time is right. And our new asset inflation-linked asset class (commodities, infrastructure, forestland, inflation-linked bonds) further diversifies our portfolio. The market value of our investment portfolio has varied, but we are a buy-and-hold, long-term investor.
EXCUSE ME? FIRST THEY SAY THEY “SOLD OFF” A PORTFOLIO
OF FUNDS AT THE “PEAK” OF THE MARKET- YEAH SURE THEY DID
BUT THEN THEY SAY WE ARE A BUY AND HOLD LONG TERM INVESTOR- SO WHICH IS IT? TALK ABOUT LYING OUT THEIR TEETH
CalPERS has a proven capability and track record. We are resilient.
We began in the depth of the Great Depression. Our record for the past 25 years includes 20 positive years with an average return of 15 percent versus four down years with an average return of -5 percent. We are diversified, disciplined and focused on minimizing employer contributions. We weathered other market storms of 1987, the savings and loan crisis of 1989, the dotcom bust of the late 1990s, and the 2000-2002 recession. We also have the right people and the right tools, augmented by top external money managers and independent investment consultants.
OH MY GOD THIS SOUNDS LIKE THE PERSPECTUS FOR THE GUY
WHO JUST GOT BUSTED FOR THE PONZI SCHEME–15%
AVERAGE RETURN FOR 20 YEARS—BS— NOT EVEN BUFFET IS THAT GOOD
No one can predict when a market recovery could occur, but going forward, we are going to use our full range of resources and talents to protect your financial interests today and into the future.
BE AFRAID IF YOURE DEPENDING ON THESE GUYS FOR YOUR
RETIREMENT- BE VERY AFRAID
Marcia, rants is right. Calpers should have never been levered 4 : 1 that is the problem. Unfortunately this was all too common, and now deleveraging is like adding rocket fuel to the deflationary fire. What is Calpers’ overall leverage? If you are levered at 10 : 1 all you have to do is lose 10% to wipe out everything…….. 4:1, a 25% loss wipes out everything…. equities are down 40-50% with CA real estate down 40%, then the creditors start asking for their money, because they don’t want to lose their money…………. please see the current state of hedge funds for reference….. or the current state of California… that ball game is over.
Mav and Rants-
Just as you surmised, I work for a local govt agency (not a city or county, but a harbor district). We participate in CalPers instead of Social Security. This is how it works for our agency. There are two parts that are paid, just like Social Security. The ER part and the EE part. The EE part is fixed. The ER part floats with the performance of the portfolio of CalPers.
Currently our agency offers 2.5% at 55 yrs of age. That means for every year of service you work, you accrue 2.5% of your final year’s wage. If you work for 10 years, you can retire with 25% of your pay. With 20 years in you would retire at 50% of your pay.
This costs our agency: 14% for the ER part and 8% for the EE part. Now figure out how many of the agencies in California are sending in money each pay period to CalPers, and you will see why, even with the market downturn, there is plenty of money to pay out current retirees.
After 9/11, CalPers moved us all from a 3-year performance averaging to a 15-year performance averaging, because agencies were getting whip-sawed due to the stock market volatility. In theory, even if agencies see a 25%-35% loss in their current year’s performance, you are correct in that it may mean another 1%-2% difference in our ER contribution.
By the way, we are entitled to buy another 5 years. At age 55 this costs approx 1.2x annual comp. So at $60K, it would cost $72K. It can be financed.
The other factor is a number of agencies pay both sides of CalPers. It takes 5 years to “vest” in that as long as you work for some agency that offers CalPers, you will receive retirement monies after 5 years combined service.
And yes, I put the max of $20,500 into my “401k” (govts have 457s) each year, as I agree, you never can tell.
Probably more info than you ever wanted to know about CalPers.
Mav and Rants-
I tried to reply to your blogs but Jon won’t let me reply. I don’t know why. It was purely informative and quite civil. I don’t know why.
read this story about sonny kim- house flipper/ mortgage fraudster
now multiply his story by a hundred thousand others just like him
around the country- now you know why the credit markets are
stuck in the twilight zone da da da da da da da da
http://www.tampabay.com/news/humaninterest/article919554.ece?ref=patrick.net
you can usually tell if someone knows what theyre talkin about-
it has a ring of truth to it- like this lady– I just love listening to a really
intelligent woman- dont you?
http://online.barrons.com/article/SB122912505428802977.html?mod=b_hpp_9_0002_b_this_weeks_magazine_home_left&ref=patrick.net&page=2
“CalPERS is lying about its performance, and there will be serious consequences for California retirees and taxpayers.”
http://wcvarones.blogspot.com/2008/12/calpers-implodes-just-as-predicted-here.html
Let me get this all straight. Calpers borrows money to invest in real estate and we taxpayers will have to foot the bill for a bad investment. If I borrowed money to make a bad investment, I pay for it out of my own pocket. Why do I have to pay out of my own pocket to cover these mistakes? I think that the retirees should take a hit for this, not the taxpayers.