Drama. The California Public Employees’ Retirement System (CalPERS) currently has $300 billion under administration, 3,000 employees and another 30,000 who are retired and drawing benefits, and 1.7 million paying clients and pensioners; it is one of the largest private pension plans in the World and it pays a defined benefit based on salaries and service for both pensions and medical benefits – and we say that it is the “Benchmark For Pathos” (pathetic) and, in our view, “criminal” or “indictable” because they might just as well steal the money from their clients who are “captive” to this system but there isn’t anything that we can say or do that will change that (City Journal, Winter 2013, The Pension Fund That Ate California) and it’s not our job anyway.
The entire “investment plan” (such as it is and they’re looking for excuses to raise payments and reduce payouts) could be replaced today – this very day – by a handful of accountants whose only job is to take money from the clients, manage the cash flow for the payment of benefits and buy stocks with the money that they don’t need this month and it doesn’t really matter what stocks they buy but they can stick to the major markets and might as well buy some stocks in Europe and China too and we would direct them to the Dow Jones companies, the NASDAQ 100 and the S&P 100, the DAX and FTSE 100 and the Hang Seng, for example – that’s already a $40 trillion market for which $300 billion looks like petty cash and they ought to be embarrassed that that’s all that they have; please see Figure 2 on the right.
The Board of Directors, of course, can do whatever it wants but to suggest that they are “investing” their clients’ money is about the same as “blood-letting” for the good & health of the patient (circa 15th century and before) because if it’s an investment it requires 100% capital safety – guaranteed – and a hopeful but not necessarily guaranteed return above the rate of inflation which if it doesn’t get it is just another way of losing our money. Anything else (including government bonds) is just a gamble and “volatility” has nothing to do with investments and will not determine their worth as an income.
Finally, it should be noted that the Board of Directors and its Investment Committee can not prove anything that they say but we leave it up to the clients to “suspend their disbelief” or do something about it.
For more information and examples on the Free Market Yield and the terms that we have used above, please see our Posts “(P&I) The Dismal Equation (Ecclesiastes 9:1)” and “(B)(N) S&P 100 Volatility Risk and The Full Moon” and “(B)(N) NASDAQ 100 Volatility and The Stone Bunnies“ and for an introduction to The Barometer “(B)(N) What’s A Girl To Do” or “(P&I) The Swiss Franc Debacle“.
And for more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.
And for more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.
And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.
And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.
We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product
The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
With No Fees and No Loads on Capital
For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.
Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.