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CalPERS divests gun manufacturers, shoots retirees in feet

CalPERS divests gun manufacturers, shoots retirees in feet

California made a move yesterday that makes about as much sense as throwing away your telescope to get back at that meteor for hitting Russia.

And yet, in California, it’s strictly business as usual (via LA Times):

The nation’s biggest public pension fund is taking a stand against gun violence by voting to sell all its investments in two firearms manufacturers: Smith & Wesson Holding Corp. and Sturm, Ruger & Co.

On Tuesday, the Investment Committee of the California Public Employees’ retirement System voted to sell about $5 million worth of the gun makers’ stock and other securities. The full CalPERS board, which has the same 13 members as the Investment Committee, is expected to ratify the vote on Wednesday….

CalSTRS [California State Teachers’ Retirement System ]and CalPERS took up the divestment issue at the request of state Treasurer Bill Lockyer, a member of both boards. Lockyer called the vote “largely symbolic” but stressed that it’s an important way to spur incremental change.

You see, in California, protecting pension funds so that they’ll be there for the pensioners is less important than making a symbolic point.

The California funds have a long history of using divestment as a tool for social and political change. Their decision to sell investments in companies operating in South Africa played a role in ending the white supremacist regime and its apartheid policy of separating the races.

Right.  So investing in established gun manufacturers whose stock prices are likely to keep rising is now the equivalent of racial discrimination.

As you might recall, CalPERS lost nearly a quarter of its value at the end of the last decade after making several high-risk investments while selling off good ones:

The fund’s chief investment officer who was then given credit for the move away from the “traditional stock-and-bond portfolio more toward so-called alternative investments that might generate higher returns in the long run” was Russell Read.

Read resigned in April 2008, before the crash, to form his own venture devoted to “environmental and clean-tech investing.” So he missed this:

The fund’s real estate investments, undertaken as part of the fund’s move into riskier investments, got into big trouble as the housing bubble burst, for instance, and required injections of capital. To raise money for that, Calpers sold stocks into the market’s decline, locking in losses and missing the subsequent rebound. One example that the authors offer: Apple stock. In April of 2008 Calpers sold 2.3 million shares of the stock to raise $370 million. Today those shares are worth about $930 million. Calpers lost big (or rather, California taxpayers did), with its real estate investments. The fund lost nearly $1 billion in the bankruptcy of Landsource, which owned land it planned to develop in and around Los Angeles…

The company that Read co-founded was called C Change Investments, which credited him in an early press release for “successfully transition[ing] America’s largest pension fund toward clean technology and environmental investments.

C Change, it appears, has had a batting average close to .000 in terms of getting green energy projects off the ground.  Though its website is still up, there’s now only one page, down significantly from when the LLC was doing a lot of chest thumping.

As for Read, in 2011 he laid the groundwork for Al Gore’s sale of Current TV to Al Jazeera by becoming chief investment officer and deputy chief executive officer of Gulf Investment Corp.

Headquartered in Kuwait.  Where the only green is petrodollars.

Mr. Read, in a telephone interview from Kuwait where he is based, said he is looking forward to the new challenge of helping foster economic development in the six-country Mideast region of Bahrain, Kuwait, Qatar, Saudi Arabia, Oman and the United Arab Emirates.

He said he will be looking at a wide range of investment opportunities including those in health care, agriculture and industrial development.

If Read has learned his lesson, as the range of his investments suggests, he’ll take a really close look at Smith & Wesson.  Those Arab states paying his salary expect results, not symbolism.

Too bad Californians don’t demand the same.

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Comments

The California funds have a long history of using divestment as a tool for social and political change. Their decision to sell investments in companies operating in South Africa played a role in ending the white supremacist regime and its apartheid policy of separating the races.

The irony being that it was ownership of guns by blacks that helped end the racial violence against blacks in the south…

And frankly, I’ve long considered anyone that holds the view of “the gun manufacturers are to blame for gun violence” to be among the very dumbest of people.

Moving significant amounts of pension funds into high-risk, high-volatility positions – moving “traditional stock-and-bond portfolio more toward so-called alternative investments that might generate higher returns in the long run”- is “largely’ poor financial stewardship.

And, I wonder if the CalPERs pension fund has entertainment stock, say in Comcast, IMAX or Lion’s Gate? By divesting media maker stock, stock which supports the constant portrayal of violence, would be more symbolic than selling appreciating firearm stock back to the market makers.

http://www.bizjournals.com/losangeles/news/2013/01/02/media-stocks-top-performers-in-2012.html?ana=RSS&s=article_search&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+bizj_national+%28Bizjournals+National+Feed%29

    serfer1962 in reply to Sally Paradise. | February 20, 2013 at 1:34 pm

    Look at it from the plus side…
    1) Unions are gonna be hurt
    2) CA unions in particular are gonna be hurt
    3) Gun Nuts, aka Americans who own guns, can now invest in a gun company at a reduced cost
    Whats not to like about these clowns?

It’s always easy to make a stand with other people’s money. Let’s be honest do you think they would do this, if it the tax payers weren’t on the hook to make up the difference. I wonder if the taxpayers of California sued them because they aren’t making the best ‘fiduciary decisions.’
This is a question for legal for the professor, et all, can a state (or any tax payer backed) pension plan choose political over fiduciary? Aren’t they legally obligated to choose the best investments ?

    legalizehazing in reply to freddygeorge. | February 20, 2013 at 11:04 am

    Exactly what I was thinking. Other people’s money apparently Gets No Respect. Also is the pension fund doing well enough they can afford this? Cause it seems that pension funds in blue states seem to mysteriously shrivel up… I guess we can all see why now.
    I’d sue the heck out of these morons

    casualobserver in reply to freddygeorge. | February 20, 2013 at 11:27 am

    Very few hard core progressives I’ve met consider tax dollars ‘other people’s money.’ Like a tithe, it is your due that natural belongs and is the property of the state.

    You only have to listen to some of the elected class in these debt and sequester debates to see signs of it. They resist any direct conversation about the efficiency and efficacy of federal spending, some going so far as to say we don’t have a spending problem. I’ve heard more than one say that waste is a natural result of spending, for example. The pension board in CA has taken that same self-righteous attitude to a new level to me.

casualobserver | February 20, 2013 at 8:59 am

Hey, we all know the most important value for tax dollars is as a “tool for social and political change.” Even pension dollars. (sarcasm)

One wonders how much pride the collective receives from this action and ones like it. Will the taxpayers who are turning over more to the state ‘feel’ better? Will the pensioners ‘feel’ better even if their pool of money is now more threatened? I suspect the only ones who are proud and got a ‘feel’ good boost about the move are the 13 members who apparently were unanimous in their decision.

KM from Detroit | February 20, 2013 at 9:03 am

“Headquartered in Kuwait. Where the only green is petrodollars.”

I’ve been spending too much time on the internets; I read that the first time as “pedobears” instead of “petrodollars.”

MaggotAtBroadAndWall | February 20, 2013 at 10:12 am

CalPERS is an elephant. If it decided to flush it’s holdings in an unorganized way, it would create a big dislocation in the market and depress the stock price. But it won’t do that. It will be a disciplined seller over several months.

Maybe Smith & Wesson and Ruger should do to California what York Arms did after New York enacted it’s anti-gun law. York cancelled all orders from any NY government entity that does business in NY. Make the government just as helpless in defending themselves against bad guys as they want the rest of us to be.

Liberals say the solution is that we don’t have enough whistles. Give the cops the scariest, most lethal whistles money can buy.

http://www.ammoland.com/2013/02/york-arms-cancels-all-its-new-york-police-orders/#axzz2KvrubcNd

    I would agree except the idiots at CALPERS just make CALPERS and CALSTRS, not state-wide policy. What the gun mfgs oughta do is publicly state they are stopping buying raw materials from any CA entity, whether they now do or not.

    BTW, because I have standing might be interested in joining a suit against CALPERS for this idiocy. Anyone know of any links to potential actions?

      MaggotAtBroadAndWall in reply to 49erDweet. | February 20, 2013 at 12:15 pm

      CalPERS is ginormous, somewhere in the neighborhood of $200 billion. The current market value of the entire Smith & Wesson company is only about $800 million. According to this, CalPERS is not even one of the ten largest holders of S&W, which means they own less than 2%.

      http://finance.yahoo.com/q/mh?s=SWHC+Major+Holders

      But let’s say they own 2%. That means they only own $16 million of S&W stock. So their S&W position is only about 0.01% of its entire portfolio. Not 1%, but 0.01%. Even if they sold it all for $0, it would be immaterial to the performance of the entire CalPERS portfolio.

      I don’t know if Phil Angelides is still associated with CalPERS, but when he was he used to use his position to champion far left liberal causes. This announcement is just political grandstanding and will have no impact on CalPERS investment performance.

      When I made my comment above, I wasn’t aware how tiny it’s position in S&W is.

        Thanks for your homework. Not very surprising given progs ability to assume self-importance magnitudes larger than their actual shadows. Would still love to needle the idiots for “malfeasance in office amounting to gross criminal stupidity”.

That’s ok. As a California taxpayer I am on the hook to make sure the fund ears its assumed 8% return. Why should they invest in profitable companies?

This is another example of Liberals attempting to unjustly extend their personal influence with other people’s money… only in California

I can’t fathom the kind of personality that justifies these behaviors.

    The mindset is “We always know best what’s good for you. Live with it!”
    And it’s NOT only in CA, regretfully. There’s a small-minded colony called Massachusetts (or something similar) that thinks the same way.

Doesn’t the board have some kind of fiduciary duty toward owners of the pensions? I’m no expert in this area of the law, but it seems to me that selling an investment merely to make a political statement could violate this duty.

Jeezuz, people, it’s an investment portfolio, not a freakin’ Crusade. Do your good deeds where it’s not going to pauper me, please.

These decisions affect real lives. My daughter left the labor & delivery floor at a hospital she loved, to move to a University of California operated hospital in order to get vested in the state retirement plan. Now she struggles at a hospital that she doesn’t respect, or trust for that matter, but one can only wonder if her retirement pension will be there when she needs it.

CalPERS has an investment return target of 7.5% (which it lowered from 7.75%) and earned 1% for the fiscal year 2012.

SWHC and RGR have skyrocketed since Obama was first elected … but they are evil, evil companies.

Exxon is evil too, right? But it is CalPERS largest equity holding. That’s weird, eh?

You know what else is weird? Their holdings of the following companies which make things for the express purpose of killing people, including, quite shockingly, unmanned drones. Yes, drones!

Boeing, Lockheed Martin, Northrop Grumman, BAE Systems.

They also have holdings in Hollywell and United Technologies.

Guns—Bad!!

Oil and Drones—Good!!

Subotai Bahadur | February 20, 2013 at 1:24 pm

Trying to explain the concept of “fiduciary responsibility” or the larger concept of “responsibility” at all to a Democrat is like attempting to teach quantum physics to Schrödinger’s zombie cat. It is not going to work out well, and the reaction will probably be mindless violence.

California is busy committing suicide. There is no point in trying to interfere and prolong the effort. If they sell their stock on Smith & Wesson and Ruger, or any other “evil” maker of firearms; I rather expect that there will be no lack of willing buyers who will be glad to enjoy the profits.

There being few things as prone to civil disorder as a ward of the state who has just had his Binky™ taken away [see the public employee unions in Wisconsin and add an exponent]; the consequences should be fairly immediate as soon as the checks start bouncing. The only thing keeping me from wishing that it would start immediately is a daughter and her family who are trying to run a small business in California. However, they are looking at fallback positions in other states. As soon as they cross the border back to the United States, let the games begin.

Subotai Bahadur

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