Pension Funds Are Underwater – And Taking Us With Them

The California Public Employees’ Retirement System (CalPERS) has announced its worst performance in seven years. Its meager rate of return for the fiscal year ending June 30 just managed to squeak by .6%, not even beating our current meager rate of inflation. 

After two successive years of tepid returns, long-term fund averages have sunk far below the critical 7.5% benchmark. It’s bad news for California taxpayers, because if returns don’t soon show a long-term average of 7.5%, they’ll be the ones who will have to make up the difference. Ted Eliopoulos, the fund’s chief investment officer, admits the massive pension fund’s long-term returns are well below anticipated levels, telling the Los Angeles Times, “We’re moving into a much more challenging, low-return environment.” 

The bad news is: If you’re a California public employee, you’re going to take a hit. But even if you’re not a public employee, but merely a California taxpayer, you’ll also take a hit. In addition, while private employee pension funds don’t pose the same financial risk to non-participants, their members run a similar risk; after all, they’re toiling in the same universe of stocks and bonds. 

According to a 2014 article written by David Stockman and posted on his blog, the former Director of the Office of Management and Budget under President Reagan says eighty-five percent of pensions will fail if their returns average just four percent. CalPERS is reaping less than one.

The uncertainties that are constricting growth in bond yields and dividends – and therefore in the pension funds that invest in them – are the very same uncertainties currently driving the bull market in physical gold.  Don’t abandon your pension fund or employer plan by any means. But in the long run it may work out better if you’re at least as conscientious, if not more so, about setting aside a monthly amount for your safe haven precious metals.

DYI Comments: As 1st world wide central banks embarked upon massive QE, sub atomic/negative rates, many years from now economic historians will compare this mania to the speculative tulip bulb craze of Holland or the South Sea bubble of England.  The unintended consequences are already here as current retirees who augment Social Security by living off their CD's.  With rates so low they have to spend more and more of their principal to make ends meet. Many have already depleted their savings living in poverty due to these misguided policies.  Soon it will be pensions such as CalPERS and then it will be the holders of 401k's.

Why has the Fed's pushed this policy?  The real reason. Our central DOES NOT work for the American public.  Their goal from day one of their existence in 1913 are to privatize their gains and socialize(taxpayers) their losses for the New York and London centered banks.  An excellent book regarding the Fed, its true mission, along with its history, without all of the economic jargon:  The Creature from Jekyll Island by G. Edward Griffin.   And by the way the author's prose flows like butter making for a delightful read.  Informative and entertaining.

DYI