Friday, October 30, 2009

Molly Janczyk and Mario Iacone on managing risk

From Molly Janczyk, October 30, 2009
Subject: RE: Dennis leone's opinion
Dennis and John Lazares have feared ability to pay benefits and poor investments for a long time. For ex., they warned of Fannie Mae and Freddie Mac downturns and were dismissed by the 'experts.' Now, ability to pay benefits is at infinity and yet both wanted these issues (along with many of us) addressed years back. STRS stays stuck on its customary plan within their comfort zone. They are like the legislators who only act with in crisis mode vs. planning ahead. Now, STRS has made 'slight' changes in a commanding challenging time. Strong recommendations suggest removing the 88% SOONER, upping age for retirement SOONER and making the changes for new retirees SOONER vs. 2015 to get a start on reducing the liability and increasing ability to pay closer to 30 yrs.

Once again RETIREES are reduced in 2011 not 2015! Retirees had NO WARNING AND HAD TO BEAR CATASTROPHIC changes virtually overnight. One can hope the ORSC demands quicker implementation as who knows what kind of market the next years will bring.

But, remember who we have on the board: OEA board members, Puckett who votes with them and others among them who are influenced by OEA and STRS attorneys and staff who have not changed their tactics or verbiage saying the same stuff to bring board members under their line of thinking.

The 'dissenters' are gone and the majority of Board members follow STRS, OEA protocol. Even if one stands up, no hope of going against the once again majority in place. Of course, that would matter not to Leone or Lazares who always voted for retirees no matter what always asking : "How does this impact retirees?"

From Mario Iacone, October 30, 2009
Subject: Dennis leone's opinion Date: Fri, 30 Oct 2009 11:22:35 -0400
Molly,
Let the others know that while we concerned ourselves with the type of assets STRS is supposedly using to manage risk, we missed the most significant point.
(Molly's analysis expressed the following concerns and questions indicated in blue)
My concerns is the 'slight' adjustments in stock weight, 'slight' changes in asset allocations translating to 'slight' increases to alternate investments.
How much protection can this slight shift possibly provide if another downturn comes every few years or if our current market becomes more of a standard market never returning to the more extreme highs we have basked in over the past decade?
Only goes to show the more heads involved, the more is learned.
On a more serious note, wonder what Dennis Leone's opinions are on all of this as he knows far more about the investment strategy at STRS than we will probably ever know.
Especially with concerns that he expressed in the past well in advance of the current losses.
Refer you to

Dennis Leone Urges STRS Board to Prepare for Significant Stock Market Downturn

The following excerpt is taken from.

Ohio Retired Teachers Association (ORTA)

QUARTERLY REPORT*

By Dennis Leone,

STRS Retiree Board Member

March, 2007

Among a number of items Dennis reported and discussed in his quarterly report was,

………………..Finally, I have an obligation to share with retirees why I disagree with published projections by STRS that our current 47-year unfunded liability is projected to hit the desired 30 years by 2009. Note the charts below:……………………….

………………………….My point is simply this: Absent a continuation of the great investment returns, we will not offset the realities (if they continue) of the other three areas shown above. I am hopeful my fellow board members will be agreeable to approving a contingency plan to minimize the negative impact of a significant stock market downturn………………………

Larry KehresMount Union Collge
Division III
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