Major public pension funds have taken severe losses. Many are down 20% or more. CalPERS, the largest in the nation, managed to lose $40 billion, about 20%, since July and their public pension benefits are guaranteed by law.
A huge taxpayer backlash against overly generous public pension plans is brewing. Boomers with destroyed stock funds and IRAs are not going to want to have taxes increased so that public workers can get 90% of their salaries for the rest of their lives during retirement.
Sure, we’re in a bear market. But losses like these are unacceptable for a pension fund. What kind of investments were they in and why didn’t they see the crash coming? Look. I’m a small investor and I’m up 10% so far this year, mainly by buying puts. It wasn’t rocket science. I find it astonishing these pension funds suffered such huge losses.
The bear market is nowhere near over either. We will probably have an Obama rally for a bit, so enjoy the current bear market rally while you can because the bad earnings season is coming. That means more pain for the pension funds.
40% of pension plans are underfunded and that assumes future returns of 8% annually. Good luck with that.