Posted Feb 3, 2017 by Martin Armstrong
Here is a board meeting of CALPERS illustrating that (1) the majority of the board is totally without any experience in financial markets and (2) they are trying to throw off the board anyone who points out they are in trouble. Pension funds on average need 8% to break even. You will hear in this discussion a number of 5.5%. Back in 2008, CALPERS sold off its stocks to raise cash for obligations. In December, CALPERS sold off its Tobacco stocks, which was being politically correct rather then as a fund manager. You have people looking at these decisions by CALPERS, who are political, and then you have traders assuming the market should crash because they know something technical.
That was the story in May 2016 when CALPERS was considering selling all Tobacco stocks. That decision came from the State Treasurer, not some investment manager. Back in 2013, CALPERS was being politically correct again and sold all stocks they held in two gun manufacturers. In 2015, CALPERS was considering selling all stocks to eliminate volatility. DO NOT look to these institutions as some sort of demigod. Their decisions are worse than some local investment club. These people are political first – always remember that. Don’t be surprised if they sell all stocks related to Trump because they supported Hillary.
I have stated many times that I have been called into board meetings around the world of major companies in many fields. I have been shocked at the lack of sophistication. Rarely do you find people who understand the financial markets, hedging, currency, or even how to invest at the board level. This is why I have not supported conspiracy theories that paint these institutions as all knowing. The truth is exactly the opposite. They need serious help. I have been called in countless times to deal with some urgent crisis and they need someone who actually has experience.
CALPERS may be the second largest pension fund in the USA, yet its decisions are not professional but rather politically driven before anything else. Here is the transcript requesting a board member to resign because he warns that CALPERS is in trouble. This board member calls it a breach of fiduciary duty not to release information that shows they are in trouble. This is like Snowden is a traitor for telling the people the government is acting illegally.
We have pension funds in crisis and these sort of people, without experience, have been asking Congress to seize 401Ks and hand those funds to them to cover-up their mismanagement. And those who are so against Trump trying to reverse the trend in government are the very ones who will suddenly find their future is gone and will still blame everyone else other than themselves for believing in a system run by people without any experience acting politically correct first. Not even Trump will be able to stop this meltdown and will most likely be blamed for it.
Bill Slaton: Yeah, I have some more comments, and I wrote them out and thought about this a lot because after I read these comments I thought about them and I shared some of the concerns, and as I look at these and think back over the last 18 months – and Mr. Jelincic, I’m going to address you in this – that as I’ve observed, you’ve taken unilateral actions that to me are clear violations of fiduciary duty, and by implication placed our fiduciary duty as a board at risk, and the common theme is the disrespect for the governing rules of the organization.
“To be more specific, I’m talking about the disregard for confidentiality of materials or decisions reviewed or made by this board, but I want to be very clear about this. The comments I’m making today have nothing to do with Mr. Jelincic’s views regarding the issues this board faces, nor is it about his fair challenges to staff and other expert opinions presented to us, and in fact, I believe very strongly that minority views properly conveyed are vitally important to fostering honest and robust decision making and board oversight of this organization, so given that there have been multiple times that this has happened over the last 18 months – and I say this only very reluctantly – there are in my view only two possible solutions to protect the fund from the risk of continued fiduciary violations. The first would be for Mr. Jelincic to voluntarily resign his board position. Although it is clear that he possesses extensive knowledge in the investment arena as well as valuable historical perspective on all matters pertaining to CalPERS, this behavior – again, in my opinion – negates the advantages he brings to the board and the constituency he represents. If he chooses to remain on the board, I ask the board president to place on the board agenda as soon as possible an action item regarding a sanction or sanctions to be imposed by this board, and one sanction I ask to be considered would prohibit Mr. Jelincic from attending any closed sessions conducted by any committee or the full board while he remains a member of this board due to his repeated unauthorized disclosure of confidential material.”
I bet if there was a poll asking who should resign, I think it would be Bill Slaton.