Wednesday, December 17, 2008

Expect to Hear More of This....

Calpers (the California public employee pension) managed to lose more than 100% on their most recent investments in real estate. In order to lose more than you invested you have to be either really stupid or willing to take on way too much risk (or both).

In this case, it appears Calpers was both. They apparently borrowed billions to buy up overvalued California real estate. City and county officials are going to be left scrambling to make up the shortfall via ....... wait for it ......... new taxes!

"At the height of the property bubble, California's giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it's one of the biggest owners of undeveloped residential land in America.

Calpers has lost almost a quarter of its assets since July 1, the start of the current fiscal year.

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 residential 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."

It is worth watching how NYS public pension performance.

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