Another reason to leave CA

[FlyerInHi]

[quote=EconProf][quote=spdrun]And who says that CA can’t default on those obligations if things get dire? Overpaid ex-cops are a very small voting bloc…[/quote]
I wish it were that simple. But the courts have decided, due to something called “the California rule” that those promised pensions must be honored, no matter what the costs to local taxpayers. So the school districts and local counties and cities must drastically raise taxes or cut services and employees to pay the pensioners.[/quote]

So true. As more of the budget gets diverted to pensions, services will decline. But still no reason to leave now — maybe later. I believe economists say there’s an optimal point to everything.

[sjk]

The federal bankruptcy statues easily trump any state laws governing pension guarantees. They won’t stand a chance in federal bankruptcy court….

[phaster]

[quote=EconProf]Speaking of pension problems….

That is yet another reason to leave California. It is well established that our public sector CA pension systems are grossly underfunded, a result of overly generous pension benefits, super early retirement plans, and “kicking the can down the road” by failing to levy high taxes on current taxpayers.
But the math is catching up with CA, as we now face vastly higher taxes or reduced government services to pay for public sector retirees. Pension costs can eat up a quarter to a third of localities labor costs, up from a tiny amount a few years ago.
And this is with a buoyant stock market and booming economy feeding the investment income of those pension plans. Think what would happen if we had a normal recession, or a stock market cut in half (it has quadrupled from its low). How ironic is it that the Trump economy is currently propping up CA tax revenues such that they are exceeding past projections.[/quote]

yup,… in the short run math can be ignored,.. BUT eventually it punishes those that ignore its warnings or fail to think things out in the first place

[quote]
Study: Some public pensions funds could run dry in downturn

Many pension funds for public workers already owe far more in retirement benefits than they have in the bank, and the problem will only grow worse if the economy slows down, according to a report released Thursday.

The study from The Pew Charitable Trusts found that the New Jersey and Kentucky funds are in such perilous shape that they risk running dry.

…The Pew study, published by the Mossavar-Rahmani Center for Business and Government at Harvard University, examines what would happen to pension funds in 10 states under various economic scenarios.

…Notably absent from the report was California, which has the two largest public pension funds in the nation. They had a combined $168 billion in unfunded liabilities in 2016, according to another recent Pew report. Mennis said California’s funds were not included in the stress test study because they are so large and uniquely structured.

https://apnews.com/f1f873f4e73e4d429bf4012b6d1f6fd4
[/quote]

FYI “a combined $168 billion in unfunded liabilities” in just this state alone IMHO is an optimistic figure based on an unrealistic “high” discount rate which has been in place for decades

http://www.pensiontracker.org

[quote]
Pensions Are Still Making Ludicrous Assumptions About Future Returns

…Many state-funded pension plans today assume an 8% nominal return for the indefinite future. Some are beginning to forecast lower returns, but very few would forecast lower than 7%. Moody’s argues that somewhere in the range of 4% nominal is more realistic. Notice that the difference after 40 years is well over four times. Even if you assume that magic returns to the markets after 2020 and returns go up to 8% thereafter (the green line in the chart), there is still a gap of $5 billion after 40 years. On assets of $2 trillion, that is a gap of $10 trillion. If you assume only a 4% nominal return for the entire 40 years, the gap is $30 trillion. For the mathematically challenged, that is not a rounding error.

http://www.businessinsider.com/pensions-are-still-making-ludicrous-assumptions-about-future-returns-2013-9
[/quote]

[quote]
The discount rate changes approved by the [CalPERS] Board, for the next three fiscal years (FY), are as follows:

For public agency and school employers:

FY 2018-19: 7.375%
FY 2019-20: 7.25%
FY 2020-21: 7.00%

https://www.calpers.ca.gov/page/about/organization/facts-at-a-glance/discount-rate-frequently-asked-questions
[/quote]

PS one last thing to think about this memorial day,… “derivatives” (as in the movie THE BIG SHORT) are mathematically chaotic which compound the “risk” to the global finance system,… in other words given mismanaged/corrupt public pension portfolio(s) and “the california rule” which placed the average california taxpayer between a rock and a hard place,… if we add in the danger of “derivatives” then imagine being stuck between a rock and a hard place AND THEN KICK IT A NOTCH!!!

[EconProf]

Phaster: you are correct, sadly enough.
Pension plan managers essentially have to predict future outflows and future inflows in order to determine their solvency. The outflows are fairly easy to predict–# of pensioners, amount owed to each, their longevity, etc.
Inflows are future contributions from employees and employers, plus investment returns. Today’s politicians and pension managers overstate their likely future returns by saying it will be between 7 and 8 percent. (Private sector companies must be more realistic and are at about 4%). This allows government plans to push the true cost into the future, a future that is now arriving with a vengeance.
Again, think what a normal recession or stock market correction would do to these underfunded pension plans. Public services will be cut and taxes raised. People will flee the pension-irresponsible states like CA, NJ, IL, and go to the states with more honest and realistic public sector pension plans.

[FlyerInHi]

I already have a flight/retirement plan. For later, not now.

[scaredyclassic]

what if inflation kicks in and 7 perc is what u get in a savings,acct?

[phaster]

[quote=EconProf]Phaster: you are correct, sadly enough.
Pension plan managers essentially have to predict future outflows and future inflows in order to determine their solvency. The outflows are fairly easy to predict–# of pensioners, amount owed to each, their longevity, etc.
Inflows are future contributions from employees and employers, plus investment returns. Today’s politicians and pension managers overstate their likely future returns by saying it will be between 7 and 8 percent. (Private sector companies must be more realistic and are at about 4%). This allows government plans to push the true cost into the future, a future that is now arriving with a vengeance.[/quote]

what I find sad is there isn’t more understanding of the issue(s),… IMHO the sooner people wake up to the problem the better,… because as I see things stress on the system is building up AND at some point there might not be a way to reverse the damage done if various things blow up simultaneously

BTW you’re being too generous w/ your description of responsible financial professionals (if you are referring to CalPERS) because yet again there seems to be yet more bull$hit that they want to sweep under the carpet,…

[quote]
CFO OUT AT CALPERS DUE TO QUESTIONABLE RESUME

CalPERS CFO ‘No Longer with’ Pension Fund

Departure comes after scrutiny over credentials, past work experience.

Just eight months after he was named the chief financial officer of the California Public Employees Retirement System (CalPERS), Charles Asubonten has departed following a controversy over his qualifications.

…Sources say Asubonten was asked to leave the retirement system after a review concluded he had overstated his work experience on his resume, including his job as managing director at a private equity firm,…

http://stump.marypat.org/article/995/california-crazy-governance-and-management-problems-at-calpers
[/quote]

likewise there seem to be no local responsible professionals associated w/ the local pension portfolio,…

[quote=phaster]
May 2, 2018 – 9:28am

[quote]
San Diego County Sues Pension for Not Cutting Benefits

Retirement association says enacting lower tier of benefits would be illegal.

https://www.ai-cio.com/news/san-diego-county-sues-pension-not-cutting-benefits/
[/quote]

what I still find unbelievable is past dishonest

http://www.TinyURL.com/SanDiegoSpikingPension

and dumb

http://www.TinyURL.com/PensionRebuttal

behavior WRT managing a pension portfolio,… which
created the problem(s) in the first place
[/quote]

bottom line,… seems the idiots in charge of managing money (at the state and local levels) basically just have one unique ability,…. they squeeze taxpayers to pay for their mismanagement/corruption

[quote=EconProf]Again, think what a normal recession or stock market correction would do to these underfunded pension plans. Public services will be cut and taxes raised. People will flee the pension-irresponsible states like CA, NJ, IL, and go to the states with more honest and realistic public sector pension plans.[/quote]

as for “People will flee the pension-irresponsible states like CA,…” when TSHTF, sadly I don’t think there will be much shelter in other states simply because the way various pensions AND “derivatives” are structured,… the trend of financial markets being interconnected is ever increasing,… so FWIW one simple strategy I’m using is,… I’m trying to keep a majority of my power dry @ strong locally focused financial institutions that have no direct derivative exposure

[The-Shoveler]

[quote=FlyerInHi]I already have a flight/retirement plan. For later, not now.[/quote]

Ranch house in a rural setting?

[spdrun]

Personally, I’d take house in a moderately urban area of a country where it’s cheaper to live in but has good health care. Southern Europe, parts of Latin America and Asia.

[FlyerInHi]

[quote=The-Shoveler][quote=FlyerInHi]I already have a flight/retirement plan. For later, not now.[/quote]

Ranch house in a rural setting?[/quote]

I love 1 story modern ranch houses. If I were rich I would own a neutra inspired house in LA. But I can’t afford it.

Rural is not for me, because I like people and stores in busy tourist friendly places.
Bonafide primary condo in Vegas to avoid state income tax. Condo in San Diego because of family. Condo in Waikiki for Island vacation. Condo in Bangkok (maybe Saigon which is now a very happening place) for Asian excitement. I will make the rounds and rent them out on Airbnb for periods over 30 days. There is a market for nice fully furnished short-term rentals. And market efficiency will only improve with technology. I expect the rental income of my own residences will cover my expenses, so I don’t have to touch my real earnings or savings. Not counting on it, but I think it can work.

Southern France sounds nice too. You’d be surprised that it’s not that expensive outside of the most popular tourist areas. But sounds boring. Rents are cheap compared to buying, so maybe just rent in the destinations I want to visit, like a trade for one of my homes.

That’s basically my plan.

[flyer]

Sounds like a great plan. We love RSF, and it will always be home base, but it’s a big world, and with so much to see and do, we’ve always enjoyed living in other locales, and will probably continue to do so as long as we live. Our kids feel the same, so it looks like they’ll be following in our footsteps.

[scaredyclassic]

Truckin’ got my chips cashed in. Keep truckin’, like the do-dah man
Together, more or less in line, just keep truckin’ on.
Arrows of neon and flashing marquees out on Main Street.
Chicago, New York, Detroit and it’s all on the same street.
Your typical city involved in a typical daydream
Hang it up and see what tomorrow brings.
Dallas, got a soft machine; Houston, too close to New Orleans,
New York’s got the ways and means; but just won’t let you be, oh no.
Most of the cats that you meet on the streets speak of true love,
Most of the time they’re sittin’ and cryin’ at home.
One of these days they know they better get goin’
Out of the door and down on the streets all alone.
Truckin’, like the do-dah man. Once told me “You’ve got to play your hand”
Sometimes your cards ain’t worth a dime, if you don’t lay’em down,
Sometimes the light’s all shinin’ on me,
Other times I can barely see.
Lately it occurs to me what a long, strange trip it’s been.
What in the world ever became of sweet Jane?
She lost her sparkle, you know she isn’t the same
Livin’ on reds, vitamin C, and cocaine,
All a friend can say is “Ain’t it a shame?”
Truckin’, up to Buffalo. Been thinkin’, you got to mellow slow
Takes time, you pick a place to go, and just keep truckin’ on.
Sittin’ and starin’ out of the hotel window.
Got a tip they’re gonna kick the door in again
I’d like to get some sleep before I travel,
But if you got a warrant, I guess you’re gonna come in.
Busted, down on Bourbon Street, set up, like a bowlin’ pin.
Knocked down, it get’s to wearin’ thin. They just won’t let you be, oh no.
You’re sick of hangin’ around and you’d like to travel,
Get tired of travelin’ and you want to settle down.
I guess they can’t revoke your soul for tryin’,
Get out of the door and light out and look all around.
Sometimes the light’s all shinin’ on me,
Other times I can barely see.
Lately it occurs to me what a long, strange trip it’s been.
Truckin’, I’m a goin’ home. Whoa whoa baby, back where I belong,
Back home, sit down and patch my bones, and get back truckin’ on.

[scaredyclassic]

think8ng seriously about moving to idyllwild. listen to grateful dead and walk the mountains

[FlyerInHi]

[quote=scaredyclassic]think8ng seriously about moving to idyllwild. listen to grateful dead and walk the mountains[/quote]

Went camping up there once recently. In a travel trailer, because I don’t rough it., haha.
It’s nice but, it seem like living in fire danger zone.

What do you think of Joshua Tree? It’s becoming a hipster place of sorts. Still vey affordable.

[FlyerInHi]

California is still richer then ever.
The election of Pete Wilson, a Trump type backlash has itself caused a backlash and the results we see today. I hope we get to see the same results in other parts of the country.

Fell free to leave, if you want. But look at your friends who left before. Are they better off than you are? I don’t think so.

https://www.politico.com/story/2018/05/30/california-republicans-third-party-status-613568
California Republicans hit rock bottom

Among California’s 19 million registered voters, the latest statistics — as of 15 days before the June 5 primary — show that Democrats now make up 8.4 million or 44.6 percent of the electorate.

That compares with 4,844,803 no-party-preference voters, or 25.5 percent of the state’s voters and 4,771,984 Republicans, who both make up about 25.1 percent. The California Secretary of State’s office is expected to release its own official count later this week.

[Author]

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