This is Bad!
i thought california’s was the only pension plan wild-west enough to lever up to the market in an attempt to bridge the pension obligation gap.
here is our reason why the stock market has shot up 60% and why it hasn’t dropped as of yet. it also tells us why the bond market continues to signal a massive equity selloff, should it prevail as the true indicator of economic health (which it always has). this is just scary. we could see pensions being underfunded by 50-80% if they all have to unwind their equity positions. do they have no CFAs or even any educated risk managers on staff who should know that you don’t lever up when you’re down? this is what makes me fear a 90% drop in the market over a month. this is what makes me fear unemployment of 40%. imagine all california pension benifits stopped. thats a lot of ongoing cash flow coming to a halt.
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