It’s a scene that plays out in Las Vegas on a daily basis. Desperate after a series of losing bets and down to their last few hundred dollars, the gambler decides that the only way to get back in the black is to leverage up and put it all on the line. And you know how that story ends.

Now imagine if that gambler had $180 billion. And mixed into the pot is your pension (and the pension of every other public employee in California).

Nervous yet? The members of the California Public Employees’ Retirement System (CalPERS) should be. The organization provides retirement and health benefits to over 1.6 million public employees, retirees, and their families in California. The new head of investments at the fund, Joseph Dear, has big plans on how to get back the $60 billion the fund lost last year: add more risk!

Dear plans to divert more of the fund’s money toward private equity and hedge funds. Other likely targets for investment are junk bonds, commodities, and real estate. The very same real estate market that caused the funds’ real estate portfolio to fall 35 percent last year. And private equity? Last year the private equity holdings of CALPERS fell 31 percent.

Even Gov. Schwarzenegger, who has overseen the near bankruptcy of his state, called the fund “unsustainable”.

One area that the fund will be reducing exposure to is domestic stocks. It appears that they simply don’t offer a high enough risk/reward profile to interest Mr. Dear.

The sad aspect is that this is just the highest-profile case. The same scenario is playing out across the country, as individual investors, asset managers, and others realize that they are facing huge losses and a limited time to make up ground. Instead of taking a prudent path with less risky stocks and bonds and preserving what is left, the gambler’s mentality is taking over. Disaster is the likely result.

You can read more about Mr. Dear and Calpers here, and if you are interested in extremely safe investments that are offering annual gains that are doubling the stock market, consider Steve McDonald’s service, The Bond Trader.