Friday, December 18, 2009

Relocalized Investments?

Today in the news I read about concerns that foreign investors may gain too much control over corporate domestic assets, such as a gold mine near some military facilities in Nevada.
I hope CalPERS staff are looking for the kind of investments in basic value that such investors are likely attuned to. My father, who did reasonably well with his investments, advocated buying stock in companies that made things people needed and wanted.
From an investment perspective, rates of return on investment in production of needs are low, because such industries are usually old and stable. On the other hand, rates of return on investment in production of wants tend to be higher, because of the growth in sales often seen with new toys and also the risk that this growth is likely to be unrealized or temporary.
But it should be obvious that any economy without businesses that are old and stable and producing basic needs at affordable prices - clean air and water, healthy food, and snug shelter - cannot be a healthy economy. And without a healthy economy, no pension fund can succeed in paying benefits without recourse to the taxpayers.

Friday, December 11, 2009

Is Capitalism Sustainable?

Some recent commentary on the anniversary of the fall of communism suggests mixed reviews.
But it's safe to say that Pogo was right. We have met the enemy and he is us. No one can manage their money wisely if their underlying values are about money rather than about reality. Wall Street says it cares about Main Street, but I'm skeptical.
Of course, if worse comes to worse, you can always blame someone else.

Sunday, December 6, 2009

Is Arnold Gaming This CalPERS Pension Contribution?

I just read that the Governator wants to pay CalPERS $4.8 billion next year rather than one of the lower and longer-term options CalPERS offered the state.
But is this more or less fiscally responsible than paying one of the lower options this year and more in later years? By paying more now, Arnold puts CalPERS more on the hook for their own promise of 7.75% per long-term-average year. I wager that CalPERS' calculations of the higher payments that the state would have to make later, if it contributed a lower amount next year, are based on that 7.75% assumption. Perhaps Arnold doesn't think the state's tax economy will grow 7.75% per year in the future. I would not predict it either. (Of course, taxes are not a fixed proportion of the economy.)
On the other hand, neither Arnold nor CalPERS have offered any answers to the questions above. How will CalPERS identify and invest in enterprises whose returns will fund retirees' pensions and whose workers will produce directly the most sustainable good and services? Will these enterprises offer 7.75% ROI? I would not predict that either.
But we don't need 7.75%, especially if we are investing in direct production such as properly civilizing and empowering our children. Or investing in ecovillage smart growth.
More immediate relief could come in the form of state retirees stepping up to the plate and en masse agreeing to progressive reductions in benefits, where the smallest pensions were maintained while the largest bore the brunt of an evidence-based sliding scale. Or CalPERS could invest in the state educational system.