In this article from Chris Ponzi, just substitute the word Vermont for California and see if it may fit.
Chuck Ponzi March 8th, 2010
One of the most powerful experiences that investment bubbles can teach us collectively is how conservative we should be when burned multiple times. Unfortunately, for many of those newly exiting business schools or unaffected by a downturn show an uncanny ability to ignore others’ experiences. The most powerful lessons of this past “lost decade” in the US (if we will but open our eyes to learn it) is that outsized returns cannot be depended on, and that risk does not equal reward, it just means risk.
CALPERS, the California Public Retirement Pension fund is about to learn that lesson the hard way. Formed in the 30’s, but built on the back of the 50s through the 80’s, it’s investment options expanded from solely bonds to real estate, to equities. During this time, America experienced the greatest growth of real estate, equity, and bond values. But most of all, of leverage. Sadly, most of the value “growth” in the US over the past 20 or so years has been attributed directly to monetary growth. Indeed, as yields on lower risk returns shrink, perception of higher risk equity values go up. Unfortunately, for many, this mirage has much more power, and this perception that trees grow to the sky and all charts go up and to the right meant that there was little risk in promising free healthcare and pensions to the moon for all who worked for the grand state of California.
Except that it can’t. The high profile failure of CALPERS has been nothing short of stunning. Having lost more than 30% of its total value in 2008, it is unclear how the future promises made to state employees can be filled. Especially when those promises are built on expectations that returns are 7.75% over the long run.
Through out Vermont Goverment and Vermont Municipalities this reality may haunt us for decades.