They just can’t resist it.
You’d think that the people who manage the two biggest lead weights wrapped around the collective necks of Californians would resist the temptation to social engineer with the retirements of 2.6 million plus people and the pocketbooks of state taxpayers.
Those that do such a less-than-stalwart job of managing a combined $530 billion worth of investments between the California State Teachers Retirement System (CalSTRS) and the California Public Employees Retirement System (CalPERS) should try to do what they are supposed to do and get the maximum return from money entrusted to them by public employees, school teachers, and taxpayers and refrain from pursuing a social agenda.
CalPERS forsook oil, gun, and tobacco stocks during periods where their returns outperformed most of their portfolio because they involved products they deemed weren’t politically correct. That coupled with rosy eyed projections on the rate of return as well as the politics of expanding benefit generosity a decade ago created the public pension crisis that California is now facing.
Last month the American Council for Capital Formation issued a scathing report on CalPERS’ sustainable investment strategies of pursuing a portfolio promoting social and environmental causes instead of worrying about job one which is making as much money as possible on investments to support and protect retirement benefits. The report concluded the CalPERS strategy of pressuring firms to diversify boards, pushing them to address climate change, and dump money into funds that essentially support firms that synch with CalPERS environmental and social goals isn’t maximizing returns by a long shot.
CalPERS defenders may argue the report comes from a business-backed non-profit so is therefore biased. But given businesses have a tendency to work to maximize the return on their investment more so than say Greenpeace or PETA they might know what they’re talking about.
On Saturday CalSTRS sent a letter to Apple urging the Silicon Valley giant to research the impact of smartphone overuse on mental health. They also want Apple to come up with software that makes it easier for parents to control smartphone use. CalSTRS owns $2 billion worth of Apple stock that mas a market value of $900 billion.
Some would label CalSTRS and CalPERS as activist investors. Some might call them meddlers. But if you’re a Californian who pays taxes, has kids in schools, shells out monthly fees for municipal services such as garbage collection plus water and sewer you might call it for what it is — irresponsible forays that more often than not reduce the return on money invested. By doing so they are exacerbating a situation where investments have missed the mark for years forcing the jacking up of worker and taxpayer contributions. The end result is either higher taxes, reduced services, or both
If CalSTRS doesn’t perform in an optimum manner over the next 10 years, rising pension costs could easily jeopardize things such as class size reduction funding.
Pressuring Apple on how they are making money — which is exactly what CalSTRS is doing — is done at the risk of reducing returns. It is safe to say Apple is the expert at profiting from iPhones and not CalSTRS.
While what CalSTRS is asking seems innocent enough, it is akin to opening Pandora’s Box. Where will CalSTRS’ smugness as a social engineer go next? While they question how “unfair” Apple controls access to its apps, attack its royalty sharing strategies in the name of social justice, or even pressure them to roll out iPhones at cost to serve social-economic disadvantaged consumers?
You’d think they be more worried what Apple plans to do with the $250 billion plus in cash reserves they are sitting on and how it impacts the bottom lines of investors like CalSTRS.
The CalSTRS’ letter to Apple references studies showing teachers have a growing concern about the public health impacts of smartphone use especially on young people.
If this is indeed a concern that teachers as a whole want pursued wouldn’t the more effective way — and potentially least damaging to retirement fund investments — to accomplish it be through the California Legislature and the California Teachers Association?
At least that way they could have a significant impact of behavior during school hours. Pursuing something as extreme as treating smartphones as contraband during school hours and requiring them to be turned over when students step on campus would eliminate accessing them during breaks, lunch and in classes to send or receive items that can be classified as bullying or demeaning is much more effective than engineers coming up with yet more “fail safe” software that a 12-year-old can figure their way around.
The goal of CalSTRS may be admirable but it runs the risk of ultimately diluting the return of dollars.
And since we are on the subject of social engineering and political correctness have you noticed there was nary a peep out of CalSTRS or CalPERS in the debate leading up to passage of the federal tax reform? You’d think given the mega-Greek Chorus formed by social engineers and the politically correct crowd about how 90 percent of Americans were going to be financially ruined when President Donald Trump signed the package that CalSTRs or CalPERS would have joined the fray.
After all someone essentially worried about whether their stock in Apple is profiting from teens committing suicide would be at least a bit concerned about tax reform supposedly forcing the working poor and the poor onto the streets.