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Californicated: From Facebook To Stockton And San Bernardino: How CalPERS Became A Golden State Worrier

Tyler Durden's picture


The last few weeks have not been fun for California. Facebook's face-plant removed a large part of the unbelievably 'expected' tax revenues for the state, Stockton BK'd, and now we find out that San Bernadino - the latest and greatest city to file for municipal bankruptcy (after a $46 million shortfall in its budget was irreconcilable). The reason it's a big deal - unfortunately the state's retirement fund - CalPERS - is the city's largest creditor by far with a wonderful $143.3 million exposure. This is more than half the entire debt load of $281.4 million of the Top 20 creditors alone! The deadline for creditors to challenge bankruptcy eligibility is September 21st and we suspect that until then, the comptrollers should be renamed the Golden State Worriers? What is ironic is the same unions that we suppose are fighting the city over cuts and forcing it to take such drastic action are likely to be entirely beholden to their pension benefits from the very same CalPERS which is about to take a sizable haircut.


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Fri, 08/10/2012 - 13:20 | 2694510 govttrader
govttrader's picture

Dude...Calpers...let me manage ur money...seriously....heck...let my grandma manage ur money


Fri, 08/10/2012 - 13:34 | 2694554 knukles
knukles's picture

Lousy results generated by misguided people focusing on considerations other than returns, politically influenced, socially active, inordinately irresponsible in the investment of monies with no regard to correlation of cause and effect/cross correlation of assets and liabilities.

Up until a very short time ago, those approaching retirement could purchase additional years service at discount rates far removed from those to be earned by the fund.  Pure arbitrage.  Furthermore, the fund was loaning money at preferential rates to permit such!  Losses by design!

Let alone the lack of marking to market many bad investments still being carried as category/level imaginary hope 3.

A clusterfuck galore.

An entire shadow entitlement enrichment to the public sector without prior approval of the electorate.  This has been built without the knowledge of the taxpayers and is going to be a source of the yet to come political crucifixions along the Apian Way so to speak.

Fri, 08/10/2012 - 13:36 | 2694575 malikai
malikai's picture

Piss off the public unions enough and you get problems.

They're probably banking on that.

Fri, 08/10/2012 - 13:40 | 2694593 surf0766
surf0766's picture

Who cares about them

Fri, 08/10/2012 - 13:49 | 2694638 malikai
malikai's picture

You will when the power is out, the garbage has been piling up for months and there are no police, fire, etc. Unless you're out and prepared.

See: Argentina.

Fri, 08/10/2012 - 13:54 | 2694661 surf0766
surf0766's picture

You mean the ones who support the communist takeover of the country. Stop that nonsense argument. It hasn't worked for years.


Fri, 08/10/2012 - 13:57 | 2694674 strannick
strannick's picture

Meredeth Whitney bitchez

Fri, 08/10/2012 - 14:01 | 2694693 surf0766
surf0766's picture

Will she be 100% vindicated in the end? Time will tell.

Fri, 08/10/2012 - 14:10 | 2694739 mick_richfield
mick_richfield's picture

I'm thinking more like 400%.

Fri, 08/10/2012 - 15:26 | 2695007 Buckaroo Banzai
Buckaroo Banzai's picture

In the meantime, the poor thing has put on like 50 pounds, almost certainly from the stress she's had to endure for the crime of being right.

Fri, 08/10/2012 - 15:55 | 2695126 Carl Spackler
Carl Spackler's picture

Her timing was grossly off.

And as we all know in the finance world, timing is the most important consideration...whether to buy, sell, or continue to hold.

Fri, 08/10/2012 - 16:07 | 2695162 Buckaroo Banzai
Buckaroo Banzai's picture

Really? That's the best argument you can make? If I'm someone who sold munis several years ago on her advice, I'm going to be thrilled in 2014 when munis are selling at 50 cents on the dollar.

Being off by a few years on a call like this means nothing, when the asset in question is eventually headed to zero.

Fri, 08/10/2012 - 18:35 | 2695624 Nadaclue
Nadaclue's picture

Actually she has said a few times that they pushed her for a time and she was reluctant. They kept pushing her. I haven't watched the full two hours of the taping but I don't doubt the MSM asshats edited out some context.

In the end, it doesn't matter to me as I had no bonds but a buttload of folks dumped em. Sad really.

Fri, 08/10/2012 - 16:00 | 2695140 smlbizman
smlbizman's picture

im in baltimore county md.....the county has just borrowed 25mil from the county public pension fund at call it 7.5%....the pension funds  has just lowered its goals from like 7.75% to 7.5 %...and the are taking a bow for this dynamic move...it only cost the county(taxpayer) 15mil for this adjustment...now this money is to be used to build an all in one recycling facility..we all ready have all in one collection...our fearless leader says it will be profitable by 2015....so i am trying to figure out who is bailing out whom?

Fri, 08/10/2012 - 14:11 | 2694741 Rainman
Rainman's picture

CA gubmint retirees won't get stiffed....the bondholders will though.



Fri, 08/10/2012 - 14:34 | 2694832 ParkAveFlasher
ParkAveFlasher's picture

You don't have to pay off the entire force, just the higher ranks. 

Fri, 08/10/2012 - 14:37 | 2694842 mick_richfield
mick_richfield's picture

"Vote for Cthulhu, and You Will Be Eaten Last"

In the end -- the government retirees will get their share of the action.

They have sowed the wind.

Fri, 08/10/2012 - 14:29 | 2694811 malikai
malikai's picture

It may be nonsense economically, but it is very real politically.

Fri, 08/10/2012 - 14:07 | 2694718 piceridu
piceridu's picture

You mean a return to community based "public service? Volunteer fire departments, smaller localized police hired directly by small communities? You live where you work will be the new normal...where communities hire their own teachers, garbage collectors, public caretakers that recycle their earnings back into the community where they work. The sooner we break the backs of the monstrous public unions and their thieving pension funds, the sooner we get back to fiscal responsibility. Localized food, labor and trading with like minded neighbors (or neighboring cities and towns) is (back to) the future.

Fri, 08/10/2012 - 14:56 | 2694895 AustriAnnie
AustriAnnie's picture

Don't hold your breath.

More likely the state services will become Federal-based services taken over by central Federal authority "for the interest of the people".

It will become futher centralized, then later when the inefficiencies of greater and greater centralization forces people to fend for themselves, maybe THEN you will see community-based systems emerge.  But the central Federal authority will crack down on community-based resources as "a threat to public safety" or whatever other excuse they can come up with to maintain their control.

Power will concentrate much much further in the hands of the State before this whole thing is over.

Wars and the rationing that accompanies them usually serves as a perfect excuse to increase control over and ration goods/services/utilities. 

What you call "community-based cooperation", they will call "the black market", and anyone who dares partake will end up behind bars.

Fri, 08/10/2012 - 15:20 | 2694987 piceridu
piceridu's picture

Simple math will prevail...the religion of exponential growth might fail first and when it does, every man for himself...

Fri, 08/10/2012 - 15:26 | 2695010 AustriAnnie
AustriAnnie's picture

Every man for himself.....

...except the police state will crack down on those who try to help themselves.  The length of time for a brutal totalitarian regime to fall is long. 

Its wishful thinking to believe you will simply be left alone, and that the gov't entitites will slowly die without a fight to take every last thing you have.  And they will have a mob of fearful sheeple behind them.


Fri, 08/10/2012 - 16:14 | 2695187 piceridu
piceridu's picture

...and who will be paying for that police state? The military is the power and they have families (mothers and sisters) in small communities...Police vs. The Armed Forces...I'll take Army, Navy, Air Force and Marines over NYPD, LAPD any day of the week.


Fri, 08/10/2012 - 16:32 | 2695257 malikai
malikai's picture

That is always the key element in a revolution.

Fri, 08/10/2012 - 17:30 | 2695434 AustriAnnie
AustriAnnie's picture

There is an increasing trend of militarization of police forces.  Greater cooperation between local law enforcement and federal agencies along with military.

When more and more unemployed youth with wives and kids who are already dependent on the state get recruited for military and local law enforcement, don't count on them to bite the hand that feeds them (and their mothers and sisters in small communities).  They won't turn against the machine until the bitter end. 

Veterans who speak out against the police state are already being propagandized as traitors and PTSD-driven lunatics.  TPTB know that the military has to be on their side, and they are careful to squash dissent among the ranks.  The military will not stop getting paid.  Even if the currency collapses, its the military who have access to food and the power to loot/steal with gov't issued firepower.  And hungry troops with hungry families will have a choice: which side of the gun do they want to be on?

They can do a lot of damage before the military paychecks stop flowing.  


Fri, 08/10/2012 - 18:51 | 2695657 rufusbird
rufusbird's picture

I am glad you wrote that. The most rewarding thing for me this summer has been the gratitude of the people, ( more famlies this year) who stop and get the excess vegetables from my back yard garden. I hang them on my front fence in grocery bags with a small sign, "free vegetables".

Yesterday evening, a family on bicycles, with a daughter about my youngest grandsons age (7), stopped and got the vegetables and thanked me for them. It is like I am seeing a deeper side to my neighborhood than I have ever experencied in my life. One thing is certain, there are a lot more people who a living on the edge, and using bicycles as their main transportation, than I have ever seen in my life.



Sat, 08/11/2012 - 01:43 | 2696476 Skateboarder
Skateboarder's picture

Where do you live man? It sounds like utopia!

Sat, 08/11/2012 - 05:42 | 2696616 MisterMousePotato
MisterMousePotato's picture

rubi ... are you aware that you are violating federal law (passed last year)? Yer goin' to Leavenworth for your kindness.

Fri, 08/10/2012 - 19:00 | 2695680 BooMushroom
BooMushroom's picture

Volunteer?  You mean do it NOT for money?  How are moochers supposed to mooch if they aren't even getting paid? [/sarc]

Seriously, though, we would have to call off all the wars in the United States in order for all that to work.  No more War on Drugs, no more War on Poverty, homelessness, obesity, whatever.

Any politician calling for the end of the War on Drugs will be called soft on crime, etc, etc, etc.  Never gonna happen without upheavals.

The problem with good, honest, community-based solutions is not that they won't work, the problem is that there is not enough room for graft.  Sometimes I think I would be okay with the politicians and their cronies skimming a few billion dollars off the top just to go in their pockets, if they would just drop all these fake "wars" and let the states fix their own problems.

Fri, 08/10/2012 - 14:17 | 2694758 rlouis
rlouis's picture

The power companies are not state owned - only [mis]regulated.  Same with garbage.  Public employement reflects a corruption of entitlement expressed by that catchy phrase from the 80s said to the UC Berkely graduating class by a Wall St. crook/fraud/pathetic excuse for a human (who for attention and validation (?) rode around in a pink Rolls Royce,) remember that POS, Ivan Boesky, "Greed is good"?  Greed is not good and needs to be looked at, in the extreme, as a sickness - DSM sick - psychopath level.  Self interest is not greed and takes into account the wealth of the entire community. After the public employees have bankrupted their communities I expect they'll say they didn't know, they were only taking what was offered and are now mad as hell because they're entitled "they earned it."

Fri, 08/10/2012 - 14:38 | 2694844 Sofa King
Sofa King's picture

So what will these critical public employees do when they leave their jobs and plunge the state into chaos?

Nothing , because they are public employees that do not understand what hard work is. Sorry, if the truth stings but it's time we started facing up to facts. Bastards are not worth their Salt.

Fri, 08/10/2012 - 14:55 | 2694887 Gringo Viejo
Gringo Viejo's picture

When seconds count, the police/firemen are only minutes away. As a Californian, I would be in favor of volunteer fire departments and neighborhood watchmen. Unfortunately, it's a socialist state with draconian laws as regards fire arms and one's right to defend life and property. (Which is why criminality runs rampant in CA.)

Fri, 08/10/2012 - 15:54 | 2695118 Totentänzerlied
Totentänzerlied's picture

Please think about what you've written for 0.5 seconds: If the government had not created an enforced legal monopoly on provision of these services, there would be no issue of their availability when the government finally succumbs to its own incompetence.

You think there aren't people who would satisfy the demand for these services if the government would let them? HAHAhahaha.

Instead, when the government fails to provide these services, you get to deal with price-gouging as the least risk-averse show up to fill the supply gap for these supposedly sacrosanct services - while demand is artificially increased and before competition has been established. And you blame them for knowing the true market value of their labor.

Go on believing that only the sacred public unions with their government monopoly can do anything better than the market. You will not realize that you are paying the price, so all is fine.

Fri, 08/10/2012 - 20:58 | 2695902 ljag
ljag's picture

ot ot

Did anyone else hear about a Haarp generated tsunami coming this weekend. Just askin.

Fri, 08/10/2012 - 13:38 | 2694585 Hype Alert
Hype Alert's picture

Amputate before the cancer spreads.

Fri, 08/10/2012 - 16:47 | 2695229 greyghost
greyghost's picture

more nonsense by someone that doen't know shit about anything. the city of san bernardino has pissed this chump change down the rabbit hole called san bernardino regional airport [the late norton air force base]. 30 miles down interstate 10 is ontario international airport and yes it may close soon....no passengers! may i point out item ten.....ada restroom renovations "lease". yes, that's right they are paying 4 million a year to lease their own "restrooms"????? talk to us about pensions when the thief is in you face daily like item three: kohl's department stores for 29.5 million or how about they call up mark bush at new world systems corp. and ask for their money back on the enterprise resource "planning" system listed in line #8???? and we need not go into the shit for brains ex-mayor that pissed 10 of millions away on some wacko idea to build canals[think venice] throughout the city. you see they have a problem with very very high ground water, the city sits on a large under ground lake! now everyone in the area thought that if you need to lower the water table....well you just might sell the water for cash...right? can't wait for the fox report on the bankrupt cities in the u.s. tonight...something tells me they won't talk about these idiotic white elephants!!!!! 

Sat, 08/11/2012 - 05:54 | 2696619 MisterMousePotato
MisterMousePotato's picture

I have a bad habit. (Well, several actually.) Among them, I drink and then write some really stupid shit on the internets.

But, Grey? Hey. That was spectacularly incoherent. Epic, really.

Wanna come over and drink a few bottles of Wild Turkey with me, and then we can post shit together on ZH?

Last time I made this offer (35 years ago), I fell drunk into Camden harbor.

Nearly drowned.

Once fell asleep in a snowbank in the back yard zero degrees in Camden, too. From washing dishes at a restaurant, the front of my pants were frozen stiff. There was frost on the outside of my hat, too.

Maine is a bitch in the winter.

Fri, 08/10/2012 - 17:16 | 2695402 davey
davey's picture

Public unions will get what they deserve. Years of gaming the system, inflating there last year with sick days and vacation days from previous years. You reap what your greedy fat ass sows.

Fri, 08/10/2012 - 13:39 | 2694588 ArrestBobRubin
ArrestBobRubin's picture

Calpers, just buy physical silver, kick back w/ some fine Northern CA herb, and wait. Now how easy is that?

Fri, 08/10/2012 - 13:54 | 2694658 slewie the pi-rat
slewie the pi-rat's picture

well not quite that easy...

but close! 

<: don't forget the fuk_uWinesbyAnnCoulter :>

Fri, 08/10/2012 - 16:11 | 2695168 True.North
True.North's picture

Calpers should buy gold and sell herb (to finance buying more gold). $500+ billion in unfunded pension liabilities will not be fixed with 1% annualized returns.

Sat, 08/11/2012 - 01:40 | 2696474 mqg25
mqg25's picture

Now your talkin mon.

Fri, 08/10/2012 - 18:26 | 2695606 Nadaclue
Nadaclue's picture

Lol, right.

You do know that Calpers was one of the few pension angencies who made a point and a half in profit this year,right?

On 220 billion? You fricken know how hard it is to deploy much less make money on that kind of wad? That's after the fees paid to the hedgies.

I think you should probably just stick to what you're doing. lol

You are good comic releif though so I threw ya a green bone.

Fri, 08/10/2012 - 13:20 | 2694511 spartan117
spartan117's picture

Who cares.  We got Dwight Howard.  Go Lakers!

Fri, 08/10/2012 - 13:31 | 2694558 Temporalist
Temporalist's picture

Yea Howard will just buy San Bernadino and all will be fine.

Fri, 08/10/2012 - 18:21 | 2695586 oddjob
oddjob's picture

It's great when a sport showcases rapists and felons. Anyhow, Hoop is for mindless goons like Obama.

Fri, 08/10/2012 - 13:24 | 2694514 Cognitive Dissonance
Cognitive Dissonance's picture

"The reason it's a big deal - unfortunately the state's retirement fund - CalPERS - is the city's largest creditor by far with a wonderful $143.3 million exposure."

The cancer is intertwined, interdependant, spreading and malignant. Either we begin to cut out the dead tissue NOW or we can expect a long wasting illness to eventually consume us.

Scalpel please. Who has the whiskey and biting stick?

Fri, 08/10/2012 - 13:36 | 2694577 machineh
machineh's picture

This is not much of a cash flow issue for Calpers, one would think.

After all, its liability (pension benefits) is payable over the next few decades. 

Meanwhile San Bernardino will be suspending its contributions for however long it takes to sort out the bankruptcy -- a few months, probably.

$143.3 million sounds scary, but it is the net present value of a large future obligation.

Fri, 08/10/2012 - 13:49 | 2694635 A Nanny Moose
A Nanny Moose's picture

How many other soon to be BK cities are in debt to this political slush fund?

Fri, 08/10/2012 - 13:41 | 2694601 FreedomGuy
FreedomGuy's picture

Personally, I love the irony of the whole thing.

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